Bullion outshines record from 1980

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The British Knew What They Were Doing'

On the topic of CB selling gold, it is worth mentioning a very special event in 1999. Usually CBs announce the sale of gold and would slowly take 1-2 years to accomplish, so that they wouldn't suppress the physical gold market too much and sell into a downward spiral at fire sale price. However, there is at least one exception. According to Darryl Robert Schoon who authored a great book of "Time of the Vulture", in May 1999, the then Chancellor Gordon Brown (now Prime Minister) of Britain sold 415 tonnes of gold, almost 60% of its total reserves, leaving Britain with only 300 tonnes. 11 days earlier, Brown had requested the IMF to sell $10 billion of its gold on the open market too. So far, no real reason has been officially offered for selling gold in such a hurry. When recently Prime Minister Brown was asked again the reason of such bizarre sale, his answer was simply a decision of money management at that time. But this act is totally against any common sense of money management and the normal approach by CBs to sell their gold. The only likely reason was to knock gold price down in a very short time by dumping so much gold at once.

According to Mr. Schoon, it is rumored that British were acting probably in a joined effort with US Fed to save a large Wall St bullion bank which had a 1,000 tonne short gold position loaned by the US government. And it was at the brink of disaster when gold took an unexpected rise at that time in 1999 and the tide was turning against them. If true, this bailout is no different than LTCM and the current subprime bailouts, except the US government had absolutely no choice in this case since it had to rescue the bank and get its gold back.

Sir Peter Tapsall in the House of Commons commented and questioned about the price her Majesty had to pay in order to save a major US bank by fire selling the majority of its gold reserves at rock bottom price below $300. Bank of England Governor Eddie George commented that it was a necessary act otherwise "a further rise (in gold) would have taken down one or several trading houses". Imagine with the gold price today without this fire sale, Great Britain would have been much more solid, secure and stronger in its reserves.


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http://seekingalpha.com/article/53699-central-banks-and-gold-manipulation-or-money-management