'The worst investment in memory’
After 20 years, scathing verdict on Gordon Brown’s gold sell-off
GORDON Brown’s decision to sell off Britain’s gold reserves was the ‘single worst investment of modern times’, it was claimed last night.
Twenty years ago this week the then-chancellor started selling off a significant share of the reserves, when the price for bullion was at a 20-year low.
Over three years, Mr Brown sold 401 tons of gold out of the Treasury’s 715 ton holding, at an average price of $275 an ounce.
The sale generated around $3.5billion – or £2.4billion. If Mr Brown had kept the gold, it would now be worth around £17billion.
The average price since the sale ended has nearly quadrupled, at around $1,000. This week it stood at more than $1,200 an ounce and at one point, in September 2011, prices reached a record high of $1,920 an ounce.
Last night, Adrian Ash, director of research at Bullion Vault, the Gold Investor Index, said: ‘Today marks the 20th anniversary of Gordon Brown’s infamous gold sales decision, more than halving the UK’s national reserves at the lowest prices in two decades between 1999 and 2002.
‘Perhaps the single worst investment of modern times, Brown’s decision came as the Tech Stock Bubble peaked and many other Western central banks also cut their holdings.
‘Since then the global financial crisis has plainly made the case why private investors should hold a little gold as insurance, while emergingmarket nations led by Russia and China have dramatically added to their national gold reserves.’
Last year, Chancellor Philip Hammond described the sell-off as ‘the most potent symbol of the economic mismanagement of the last Labour government’.
The price fell sharply the moment the Treasury pre-announced its intention to sell parcels of gold reserves in a series of auctions over three years. With the proceeds of the sales, the Treasury bought euros, dollars and yen.
Last night Charlie Elphicke, a Tory member of the Treasury select committee, said: ‘Gordon Brown’s incompetence cost the taxpayer an eyewatering sum of money.
‘With these billions we could have provided better-funded public services, with more police, more teachers and more nurses.’
The decision to sell off the gold was made despite serious misgivings at the Bank of England. Documents released in 2010 revealed that Mr Brown made repeated efforts to persuade the Bank to agree a ‘joint proposal’ on the gold sell-off.
The Bank offered him advice in September 1998 but it was rejected. The Bank is thought to have told the then-chancellor to delay at least part of the sale until the price improved.
Lord George, who was then the Bank’s governor, offered only the most lukewarm endorsement of the decision at the time, telling MPs it was a ‘perfectly reasonable portfolio decision’. The losses are estimated at three times the amount lost when Britain left the Exchange Rate Mechanism on ‘Black Wednesday’ in 1992.
‘Eye-watering sum of money’