Pathetic is an apt word to describe the way that central bankers followed each other like sheep to give away their gold reserves in order to buy interest bearing paper. Where are these decision makers now? Still in power considering whether or not to sell more gold.
The FT.com posted this article on the subject which sums up the situation pretty well:
Europe’s central banks are $40bn poorer than they might have been after they followed a British move taken 10 years ago on Thursday to shrink the Bank of England’s gold reserves, analysis by the Financial Times has shown.
London’s announcement on May 7 1999 that it would sell a large share of the Bank’s gold reserves in favour of assets offering a return, such as government bonds, was the high water mark of so-called “anti-gold” sentiment among European central banks.
Many of these banks, such as those in France, Spain, the Netherlands and Portugal, decided later in 1999 to follow Britain and sell off their reserves. At that time, gold was worth around $280 an ounce, less than a third of its current level of more than $900.
European banks sold about 3,800 tonnes of gold, reaping about $56bn, according to calculations from official sales data and bullion prices.
Taking into account the likely returns from the investments in bonds, the banks have gained another $12bn. But because today’s gold prices are far higher, they are about $40bn poorer than if they had kept their reserves.
As a Brit I was gutted to see the UK become poorer by around $6bln but the Swiss take the biscuit as they are $19bln poorer having sold around 1,550 tonnes of gold.
After 10 years of steady sales, Europe’s gold sales are set to slow to their lowest levels since 1999, while central banks outside Europe have already become net buyers of gold. The US, the world’s biggest holder of gold, decided not to follow Europe’s move. Germany and Italy are the only two big European central banks which did not follow the UK, mostly because of domestic disputes about what to do with the proceeds.
The Americans did not follow the herd however there is some doubt that they still have all the gold they purport to have according to such as organizations as GATA, time will tell.
Have a good one.
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