Bank of England Gold Auctions

Author: Lawrence Chard - Chairman and CEO

Published: 16 Feb 2002

Last Updated: 1 Feb 2023


The last Bank of England gold auction sale took place March 2002, which we predicted would push gold prices up.

Our Opinion

The World Gold Council has heavily criticised the British Government and the Bank of England for the way it has handled its gold sales programme. We disagreed with the WGC criticism, as we believe that the British move to reduce the proportion of gold in its reserves was in line with modern monetary thinking. Of course it remains to be seem whether this is merely a fashion which will in time be revealed to be flawed.

Market Effect

It is likely that the regular large amounts of gold which have been placed onto the open markets by this and other Central Bank sales will have had a depressing effect on the market price for a number of years. The current British auction program is for six sales each of 20 tonnes. The previous auction round was for 150 tonnes.

The Last Gold Auction

We believe that as central bank sales come to an end, this will remove some of the downward pressure on gold prices, and therefore probably will encourage increased investment buying of gold, leading to higher prices in the mid to long term.

The allotment price was $296.50, and the amount of gold on offer was oversubscribed 3.7 times.

Gold Auctions Revisited

Looking back at this page in September 2007, we see we were right that the end of gold sales appears to have influenced gold prices in the upward direction, but we also now believe we were wrong to give Gordon Brown the benefit of the doubt at the time. With the great advantage of hindsight, we think the gold producers, and the World Gold Council were right to criticise the auctions. Gordon Brown, as the Chancellor of the Exchequer, managed to sell a large proportion of Britain's gold reserves at the lowest price for a quarter of a century.

At the time we defended Brown, we did not know that he had been advised at the time by leading bankers against the sales.

While we were wrong by being too kind to Gordon Brown in 1999, we were busy commenting that gold was, in our opinion, too cheap, and also that so called financial journalists were parroting cheap headlines, such as "Gold Has Lost Its Glitter", pointing out that gold prices had gone down over the past quarter century, was a bad investment, etc.

Part of our simple argument at the time, was that the time to buy any investment, commodity, share, was when it was at its lowest, and also when pundits were being gloomy about it. We were absolutely right, and the hacks were wrong.

With hindsight, anpother argument we should have use is that if Gordon Brown thought selling gold was a good idea, then the best thing to do was to buy gold. Jeremy Clarkson famously apologised for calling Gordon Brown a "One-eyed Scottish idiot", adding that he was wrong to call him Scottish.

These gold auctions earned him the nickname Golden Brown.

IMF Revaluation & Gold Sales

Swiss National Bank Gold Sales

You may wish to read more articles in our market news section. 

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