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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ahda who wrote (43322)	10/19/1999 2:31:00 AM
From: Alex	Respond to of 116759

Bullion sales that glitter may not be golden <Picture> by ANDREW SMITHERS, Chairman of fund manager advisers Smithers & Co Ever Since, with great fanfare but without good cause, Gordon Brown started selling Britain's gold holdings, the price has risen by around 25%. After years watching the gold price fall Brown's was a truly perverse achievement to sell at such a low price. As I remarked when he unveiled the sales, there is an old stock exchange adage that 'they don't ring a bell at the bottom', but this time the Chancellor seems to have done just that. If a politician is a man who doesn't know what to do, but knows how to get it done, Gordon Brown seems a true politician. Britain's gold sales were hard to interpret, as no rational excuse was given for them. Nor was there any good reason for the accompanying hullabaloo. The most likely aim was to push the gold price down, probably to help the US Federal Reserve, which seems to believe that a falling gold price helps keep down inflationary expectations. Whatever the motive, the plan has backfired horribly. Furthermore, the debacle has revealed a sharp difference of opinion with other European countries. It seems that Europeans didn't like the gold price being pushed down, so 15 European central banks said they would limit both the amount of gold they sold and the amount that they would lend. The news fired up the market. Since gold is, in effect, a currency, the decision not to increase lending was like a sharp credit squeeze. Lots of people were short on gold, partly because it had been going down for a long time and partly because it was cheap to borrow. Once the European banks decided to squeeze the borrowers of gold, its rate of interest went briefly into double digits and has since been knocking around 3% to 4%, which is two to three times its former level. On the face of it Britain seemed to be happy to go along with the Europeans. The restriction on sales and lending was announced jointly by 15 central banks and the Bank of England was one of them. Cynics think that, in fact, Britain was far from happy with the whole thing. This certainly seems likely in view of the egg it put on the Chancellor's face. The view is that Britain went along for three reasons. The first is that the Europeans would have gone ahead anyway and it would have looked even worse than it did if the UK had been left out. The second is that the Eurosceptics would have had a field day. The third is that it didn't restrict Britain's freedom of action in the least. Veneroso Associates points out that the agreement allows Britain to continue selling all the gold it originally planned. As for the limit on lending, its estimate is that after the planned sales all the rest of the UK's gold had already been lent. Having no more gold to offer, Gordon Brown agreed not to offer more. ¸ Associated Newspapers Ltd., 18 October 1999 Terms and Conditions This Is London <Picture: Go Back> ÿ thisislondon.co.uk