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Gold reserves selloff estimated to have cost Britain £1.5 billion

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  • GATAComm@aol.com
    Brown s Gold Sale Cost the UK £1.5 billion By Tony Freinberg The Telegraph, London Sunday, November 28, 2004 http://news.telegraph.co.uk/news/main.jhtml?
    Message 1 of 1 , Nov 27, 2004
      Brown's Gold Sale Cost the UK £1.5 billion

      By Tony Freinberg
      The Telegraph, London
      Sunday, November 28, 2004

      http://news.telegraph.co.uk/news/main.jhtml?
      xml=/news/2004/11/28/ngold28.xml

      Gordon Brown has cost the British taxpayer almost
      £1.5 billion by selling off half of Britain's bullion
      reserves just before the gold price soared.

      The Chancellor sold 395 tonnes of gold at an average
      price of $275 an ounce between 1999 and 2001,
      raising £2.3 billion for the Exchequer.

      At the time, gold was at a 20-year market low. It has
      now risen to more than $450 an ounce. Had he waited,
      he would have raised a little over £3.77 billion, a
      difference of more than £1.47 billion.

      The money lost translates to a cost of £58.41 to each
      household in Britain. Currently £1.47 billion would
      fund 50,840 new policemen, 58,480 new teachers, or
      57,640 new soldiers.

      Last night Oliver Letwin, the shadow chancellor,
      accused Mr Brown of selling Britain's gold reserves at
      "knock-down prices."

      At the time of the sale, many analysts claimed that
      the Chancellor's decision to part with half of Britain's
      gold reserves -- overriding, it is said, the objections
      of senior Bank of England figures -- was motivated by
      political rather than economic factors.

      Selling gold was viewed as an important precursor to
      joining the euro, because membership of the single
      European currency limits a country's need for its own
      currency reserves.

      In May 1999, Lord Lawson, the former Conservative
      chancellor, said the sale was "clearly motivated" by
      a desire to join the single European currency.

      Patricia Hewitt, who was then the economic secretary
      to the Treasury, denied that, telling MPs that over
      time gold had been "a very poor investment," an
      assertion that clearly she would not be able to make
      now.

      Since the Government's selloff, gold has been an
      excellent holding, rising from a 20-year low of
      $255.95 on April 2, 2001, to a 16-year closing high
      of $451.70 on Friday. The price of gold has been
      buoyed over that time by the declining strength of
      the United States dollar.

      Mr Letwin demanded an official explanation from Mr
      Brown. "People want to know where their money has
      gone," he said.

      "The answer is that it has been wasted not only on
      300,000 extra bureaucrats and £1,000 chairs for
      Ministry of Defence officials, but also on selling
      gold at knockdown prices."

      Vincent Cable, the Liberal Democrat Treasury
      spokesman, emphasised his party's belief in the
      importance of substantial gold reserves during a
      war against terrorism.

      While Mr Brown insisted in 1999 that the gold sales
      were necessary so that the Exchequer had a "better
      balance" across its holdings, Treasury officials said
      yesterday that there were no plans to sell off further
      reserves.

      The Treasury said: "The Public Accounts Committee
      addressing the conduct of the gold sales programme
      concluded that the Treasury had been rigorous in its
      approach to achieving a reduction in the riskiness of
      the portfolio."

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