There is a very simple rule that every investor follows : Sell High and Buy Low. The rule is not Rocket Science and is so simple that it can be even be followed by a history graduate from a Scottish University. Or so you would think.
Between 1999 and 2001 the Gold Price stood at a 20-year low. Rumour has it that the Bank of England counselled the then Chancellor of the Exchequer not to go ahead with his proposal to flog-off 415 tonnes of our gold. He ignored their advice and announced his intentions. The price of gold then fell even further.
The word on the streets was that he was going to spend a large proportion of the gain on Euros. That made most experts think that he was preparing us for an entry into the single European currency. The European Central Bank’s announcement that countries wishing to join the euro would have to sell off their gold reserves reinforced that view.
At the time gold represented about 17% of the country’s total reserves. The gold disposal would reduce that by 10% and leave us with the lowest bullion holdings of any major country. This was our first step towards third-world economics.
The Bank of England had been advised by senior gold traders that the Chancellor’s actions would depress the gold price even further, thus producing an even worse selling price. The Bank of England said that unfortunately they had little or no influence on the Treasury.
The sale went ahead.
Fast-forward to March 2007. Gold achieved an all-time high price of $1000 per ounce and the price is set to rise even further over the next few years.
So far, the actions of that Chancellor have cost the taxpayer at least £3billion and in the future, the loss is set to rise.
Who benefited from the Delboy-type deal? China. They bought most of it.
Just had a thought! With his obvious investment acumen, perhaps he’ll buy it all back when the price tops-out in a couple of years!!