In the late 1990s a new Labour government stormed to victory. An admiring, uncritical media allowed terrible mistakes to be made without criticism. The chancellor of the Exchequer, Gordon Brown, was viewed as a genius who promised us “no more boom and bust”. In the midst of these heady days, he made a major strategic decision. He sold 400 tonnes of gold from UK reserves.
As someone who worked in and around the London Metal Exchange for over 20 years, I was familiar with the short-term arguments against holding gold. It did not yield interest and the buyers had to pay storage charges. Don’t hold gold, said all the big financial institutions.
Over a prawn cocktail offensive, as Labour convinced the City that they presented no threat, Gordon Brown became convinced of the argument. Gold, he said, was a barbarous relic in this brave new world. He sold the 400 tonnes at just $275 an ounce on average. (These days it trades near $2,000.)
Working with a Southampton jeweller, I tried to raise the money to injunct the government, to stop the sale and to hold a review.
How the press laughed and mocked us. We failed to raise the money.
Had the review taken place, a very different picture would have emerged. Whilst gold can be highly volatile and goes through some bull and bear markets, as do all commodities, over the long term it has proved to be a great store of value.
