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Gordon Brown Sold Britain’s Gold at Artificially Low Prices to Bail Out a Large American Bank
The Telegraph’s Thomas Pascoe reported Thursday:
One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce ….
When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.
First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.
Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon “fix” between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.
The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.
It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.
One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade.
In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.
Once control of the gold had been passed over, the bank would then immediately sell it for its full market value. The proceeds would be invested in an alternative product which was predicted to generate a better return over the period than gold which was enduring a spell of relative price stability, even decline.
At the end of the allotted period, the bank would sell its investment and use the proceeds to buy back the amount of gold it had originally borrowed. This gold would be returned to the lender. The borrowing bank would trouser the difference between the two prices.
This plan worked brilliantly when gold fell and the other asset – for the bank at the heart of this case, yen-backed securities – rose. When the prices moved the other way, the banks were in trouble.
This is what had happened on an enormous scale by early 1999. One globally significant US bank in particular is understood to have been heavily short on two tonnes of gold, enough to call into question its solvency if redemption occurred at the prevailing price.
Goldman Sachs, which is not understood to have been significantly short on gold itself, is rumoured to have approached the Treasury to explain the situation through its then head of commodities Gavyn Davies, later chairman of the BBC and married to Sue Nye who ran Brown’s private office.
Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.
I spoke with Peter Hambro, chairman of Petroplavosk and a leading figure in the London gold market, late last year and asked him about the rumours above.
“I think that Mr Brown found himself in a terrible position,” he said.
“He was facing a problem that was a world scale problem where a number of financial institutions had become voluntarily short of gold to the extent that it was threatening the stability of the financial system and it was obvious that something had to be done.”
***
Responsibility is evaded by all bar those on whose shoulders it ought to rest. The gold panic of 1999 was expensively paid for by the British public.
JP Morgan was wildly short gold in 1999. See this and this. As Reginald Howe has noted:
Prior to 1999, [JP] Morgan had never held more than about $20 billion in total gold derivatives, nor more than 28% of the total outstanding for all banks. But beginning in the second quarter of 1999 [before Brown announced the British gold sales], Morgan took on a much larger role in the under-one-year maturities, possibly presaging the the British gold sales. Then, during the last half of 1999, Morgan more than doubled its total gold derivatives, taking them from $18.4 billion to $38.1 billion, which amounted to 43% of the total for all U.S. banks reporting to the Comptroller of the Currency. What is more, Morgan’s over 40% dominance stretched across all maturities. In the fourth quarter alone, it increased its gold derivatives with maturities over one year by more than 80% to $17.1 billion from $9.4 billion.
(The American bank with a huge short gold position in 1999 – in addition to Goldman and JP Morgan – was Citi.)
But would government employees actually manipulate the price of gold?
Yes, actually. As Fed chairman Alan Greenspan said in official remarks in 1998:
Private counterparties in oil contracts have virtually no ability to restrict the worldwide supply of this commodity. (Even OPEC has been less than successful over the years.) Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.
Many other governmental sources have confirmed gold manipulation as well.
As CNBC reports today:
Gold may have been manipulated like the London interbank rate or Libor over a long time frame, Ned Naylor-Leyland, investment director at Cheviot [with around $300 million under management], told CNBC.
The scandal surrounding the fixing of the Libor has opened markets up to “more scrutiny and more investigation,” Naylor-Leyland said.
He expects to see revelations over the next few months that the price of gold was also manipulated because “gold and silver reflect the true value of money the same way interest rates do.”
“It is effectively an intervention in two ways; one would be the fact that for central banks, gold and silver going up doesn’t make their currency look any good, and secondly a number of the big commercial banks have very large short positions which they like to manage and make easy money from,” he said.
***
Chris Powell, Secretary and Treasurer of the Gold Anti-Trust Action Committee told CNBC in June that “as central banks are interested in supporting government bonds and the dollar and keeping interest rates low, they continue to manipulate the gold market”.
And raiding so-called “allocated” gold accounts is another form of manipulation.
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Perhaps the U.S. didn't have, or couldn't spare the gold????? i mean, i know the U.S. has lots and lots of gold. When was the last time it was audited? Uhm....
"When was the last time it was audited? Uhm...."
Even if It's there, who holds the title?
Whoever has the vault keys in his pocket.
Wouldn't it be ironic if the elite crash the system, then head downtown to collect their gold, only to find that the vault's empty? Which is why, I rather suspect, most of the gold supposedly allocated as 'national reserve' is probably distributed between a number of off-the-radar vaults, whose keys are firmly in the pockets of selected members of the elite. I'd also bet that not more than 1000 people in the world have much have an idea where any of those vaults are.
The reason is hard to be sure of, but the fact that he did sell it, and the way he did it is bad enough. OK?
Of COURSE they're amnipulating the price - can't let gold get above $1600 for too long or it might look like the world IS falling apart, right? Nice slam down again today. Keep trying to hold that beach ball underwater the deeper you push it the higher it pops.
MOPE - management of perspective economics - manage how things LOOK to the masses - that's all that counts. Print money like mad and claim that's fine (despite all histoprical precedents). Play games with statistice - CPI, unemployment, GDP - to claim everythiiong is fine. Sure unemployment is NOT 22% (worse than the Great Depression in 1932), SURE inflation is minimal (just don't visit the grocery store) and OF COURSE GDP is growing (with inflation far higher than wha't reported the difference shows up as 'growth'.
If gold is heading up that means something is wrong with government issued -toilet paper- currency, so you can't let the price go up (even if it means that China buys the dips and is drainign the West of its gold and silver.
DeGaulle was on to something in the 60's the (US) emperor has no clothes (and maybe not much gold left either).
The next time anyone says free market capitalism....they have to buy a round for us all.
"free market capitalism"....OK...belly up....send me the bill
This isn't banking, this is the militarization of currency. Through the looking glass, my little pidgeons...
Well everyone knew Brown's Bottom was an ugly sight, but corrupt as well. Tony Blair did point out he believed Gordon Brown had "psychological flaws" amazingly he was right for once. So quote time.
“Experience has shown, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”
- Thomas Jefferson
this may prove to be the right thread,imo. just keep pulling on it.
i knew that there was some embarrassing reason why brown made a total jackass of himself in selling the nation's gold reserves at rock bottom prices.....i also thought britain had more gold than that.....in any event, it is nice to see the massive corruption of financial markets being exposed....and we know that there will be no indictments to say nothing of prosecutions.....
one of these days, not even a pompous corrupt national leader will be able to bailout a pompous corrupt bank.....
I just hope Brown got a decent price for his soul.
$3M or $4M?
http://www.celebritynetworth.com/richest-politicians/gordon-brown-net-wo...
I remember at the time thinking that he was without a doubt Blair's replacement.
gordon brown was true to his name. Gold had no worth for him. It isn't even vaguely brown.
Nope- gold is gold- shit is Brown.
shit is Brown, just as Brown is shit.
Oh, ...now that is news... I thought shit was as smooth as a libyan barrel of tonee Blair...
Gordon Brown needs hung.
'hanged'
I initially read that as "Gordon Brown needs a hug."
Damn near choked on my drink.
So when my wife said "I wish you were hung" she meant I should be strung up too?????????
Not applicaple is right here mate,
Its something to do with old English, for some reason you cannot be 'hung' in England, the old statute book read along the lines of 'to be hanged from his neck till he is dead'.
Just sayin
MSM's news 2012, reported by GATA 2001:
http://www.gata.org/node/4260
Wish I'd read it then ;-)
The U.S.A manipulates the gold price through a fund called the Exchange Stabilization Fund.
They manipulate the price of gold DAILY.
The U.S.A Treasury are Terrorist and steal peoples wealth if they try and store thier wealth via gold.
The Goverment NEEDS to STEAL YOYR MONEY,they have none.
And they need to do it surreptitiously enough to maintain a STABLE facade, lest the muppets awaken from their debt-fueled slumber.
GS may have been understating what the price of gold may hit this year.
If the true nature of the manipulation comes to light, that $10k@oz may be way to low.
Given the ceiling is infinity as measured in the non-measurable standard known as the dollar, all estimates are achievable over time.
Gordon Brown an utterly corrupt bankers puppet???
..the thought had never crossed my mind until this article today!
hey hey
Gordon Brown is but one of many idiotic leaders who did the same thing in support of the banks. Let us acknowledge the geniuses in Australia, Canada and switzerland.
please don't call Brown a "leader"
even his own party was prepared to commit political suicide to get rid of this propped-up-by-anti-depressants Scottish trainwreck by having no less than 2 leadership-challenges leading up to an election (in an election year for Christs sake!)
there is a Grande Canyon of distance between his deranged lust for leadership and to do anything to climb the slippery pole of politics and his actual ability to lead men
The only idiots are those who believe his words and actions are legitimate on their face.
Why do you supply him with excuses of incompetency when he's successfully stolen half of England's gold reserves? It seems to me the man was extremely competent.
"It seems to me the man was extremely competent."
I would say complicit would be more apropriate.
I would say those two terms are not mutually exclusive.
Correct again, NA. Characterizing Brown as stupid does dumb people everywhere a tremendous disservice. He succeeded at his task, just not the task he was elected to perform.
Talk about Helluvajob, Brownie.
Just mentioned this earlier today as a matter of fact.
Gosh.....
If there's ever a constant in all the shit and shinola surrounding every and any fucking illegality, shady dealing, real or perceived, governmental or private sector, they're Goldman and JP Morgan.
For there is nothing covered, that shall not be revealed; neither hid, that shall not be known. Therefore whatsoever ye have spoken in darkness shall be heard in the light; and that which ye have spoken in the ear in closets shall be proclaimed upon the housetops.
-Luke 12:2-3
I wonder what Brian Beatty and Peter Laskaris make of this?
http://www.ibtimes.com/articles/76903/20101028/further-silver-drama-as-traders-sue-jpmorgan-hsbc.htm
http://www.ibtimes.com/articles/76903/20101028/further-silver-drama-as-traders-sue-jpmorgan-hsbc.htm
what was the outcome of this law suit?
China will hopefully prevent history from repeating!
after reading all this banking insanity of late i propose a solution: let the fed retire all the bankers and just CNTL+P them bi-monthly massive sums of monies in order for them to stay retired. it would be significantly cheaper then consistently bailing them out for no good reason (nor any actual increased in PRODUCTIVE GDP or anything of any value).
A straight shooter could find more economical ways to accomplish the same result. Milestones
" One globally significant US bank in particular is understood to have been heavily short on two tonnes of gold, enough to call into question its solvency if redemption occurred at the prevailing price. "
So in 1999 a globally significant US bank is short 64,000 ounces of gold at $300 per ounce or $19.2 million and that will bring into question its solvency.
What a hoot.
Then, during the last half of 1999, Morgan more than doubled its total gold derivatives, taking them from $18.4 billion to $38.1 billion, which amounted to 43% of the total for all U.S. banks reporting to the Comptroller of the Currency.
You're not talking just about 64000 ounces
The article is saying they were lacking in 64,000oz of gold.. not stacks of USD.
true, but the howe reference mentions $38 billion in gold derivatives, a far bigger amount, especially over a decade ago. the fellow talking to the government might have minimized the problem.
sometimes they exaggerate too. what rascals!
Name any major financial institution that couldn't secure 64,000 oz. of gold in 1999.
How many assumptions are we going to require to make an argument?
The article stated that the example bank was short 2 tons of gold........ There was more than one bank.
Why didn't the Bank of England sell 2 tons if that was the hole they had to plug.. oh right, because you enjoy placing red herrings in a ZH forum and they figured they'd help you with that little bit. Bitch.
Gold May Have Been Manipulated Like Libor: Expert
Gold may have been manipulated like the London interbank rate or Libor over a long time frame, Ned Naylor-Leyland, investment director at Cheviot, told CNBC.
The scandal surrounding the fixing of the Libor has opened markets up to “more scrutiny and more investigation,” Naylor-Leyland said.
He expects to see revelations over the next few months that the price of gold was also manipulated because "gold and silver reflect the true value of money the same way interest rates do."
"It is effectively an intervention in two ways; one would be the fact that for central banks, gold and silver going up doesn't make their currency look any good, and secondly a number of the big commercial banks have very large short positions which they like to manage and make easy money from," he said.
A formal investigation into the manipulation of silver has been going on for two years in the U.S. “Although there is a lot of evidence that it is taking place, nothing has come out of the investigation yet,” Naylor-Leyland said.
Chris Powell, Secretary and Treasurer of the Gold Anti-Trust Action Committee told CNBC in June that “as central banks are interested in supporting government bonds and the dollar and keeping interest rates low, they continue to manipulate the gold market".
http://www.cnbc.com/id/48119741
Even at today's prices it's close to about 100 million.
If a bank cannot raise 100 mil on demand, they ought not to be a bank.
Thanks to Internet we know that we are living in an extremely corrupt and lawless society.
The World Banking Mafia is no better than Al Capone and Lucky Luciana gangsters.
It appears that, regardless to what they do or say, their days are numbered. The climax will take place very soon!
As for the gold, these gold price manipulations are helping China to accumulate gold using it to back up/launch Yuan as a reserve currency.