Britain Plans To Sell 58% Of Its Bullion
Britain surprised world financial markets today by announcing it would sell more than half the country's bullion reserves, a move that further eroded the value of what was once the safest and strongest measure of wealth.
By ALAN COWELL, May 8th, 1999, The New York Times.

Fashionably Negative Outlook
By 1999, it had become fashionable to make negative comments about godl as an investment. If media commentators got it wrong, who cared, at least you would have been in the company of most of your professional colleagues. It would have been a brave reporter who would have rung the Lutine Bell to alert the world that gold was at the bottom.
In this news article, the following comments struck us as particularly negative and gloomy:

• But the broader significance of Britain's announcement was that it drove a new dagger into gold's lingering status as a precious asset in an era of fast-paced economic globalization. Although gold has important industrial uses, from jewelry to air-bag seams, it is simply no longer regarded as an investment that retains underlying value.
• Even the World Gold Council, a trade group that represents big mining companies, called it inevitable that Britain's announcement would be taken as ''further evidence of official disenchantment with gold as a reserve asset.''
• But it has basically been eroding in value ever since, and its allure as an inflation protection is now widely considered an anachronism. In some ways the dollar, as the most widely circulated currency in the world, has replaced gold as a measure of value.

Britain Plans To Sell 58% Of Its Bullion
By ALAN COWELL Published: May 8, 1999
LONDON, May 7— Britain surprised world financial markets today by announcing it would sell more than half the country's bullion reserves, a move that further eroded the value of what was once the safest and strongest measure of wealth.
Gold prices, which have languished for years at roughly a third of their all-time high in 1980, tumbled as much as 4 percent after the British Treasury said it would sell 415 tons of its 715-ton stockpile and put the proceeds into other types of investments. Share prices in some big gold mining companies took the biggest drop in more than decade and contributed to weakness in the stock markets of South Africa and Canada, two leading gold producers.
The announcement was viewed as a maneuver by the British to pre-empt other big holders of gold, notably Switzerland and the International Monetary Fund, which have both indicated they will sell part of their huge gold reserves. Industry experts said the British wanted to sell their gold earlier to get the best price.
But the broader significance of Britain's announcement was that it drove a new dagger into gold's lingering status as a precious asset in an era of fast-paced economic globalization. Although gold has important industrial uses, from jewelry to air-bag seams, it is simply no longer regarded as an investment that retains underlying value.
Even the World Gold Council, a trade group that represents big mining companies, called it inevitable that Britain's announcement would be taken as ''further evidence of official disenchantment with gold as a reserve asset.''
In London, gold ended down $6.70 an ounce, or 2.3 percent, to $282.85, the biggest one-day decline in more than a year. In New York, gold fell $6.80, to $282.90.
For a long time, gold provided the spine of the global financial system, serving as a common measure for countries to value their currencies and the strength of their economies. At its peak, gold was the asset that backed 59 currencies, including the dollar, and the central banks of many nations hoarded stockpiles of gold. But the so-called gold standard was abandoned in the early 1970's, as national economies moved away from basing the value of their currencies on the metal.
''Ever since then, there's been a general tendency for the role of gold to be de-emphasized,'' said Phillip Klapwijk of Gold Fields Mineral Services, a leading industry analyst.
The end of the gold standard did not immediately hurt gold's glitter. On the contrary, it was still widely viewed as a resilient investment and a hedge against inflation, which helped to drive the price to an all-time high of $873 an ounce in 1980.
But it has basically been eroding in value ever since, and its allure as an inflation protection is now widely considered an anachronism. In some ways the dollar, as the most widely circulated currency in the world, has replaced gold as a measure of value.
Gold has notably failed to keep pace with many types of investments, notably stocks. An ounce of gold invested at its peak in the Dow Jones industrial average, for example, would now be worth $11,031.59, not including dividends. That's nearly 38 times higher than gold's present price.
Gold Fields Mineral Services forecast last month that the price could range between $265 and $305 an ounce for some time, Mr. Klapwijk said.
Britain is not the first central bank to sell gold. Indeed, one of the main pressures on gold in recent years has come from sales by other central banks, which totaled 412 tons last year, compared with 376 tons in 1997. But the timing and size of the British announcement today caught the gold market by surprise.
The British Treasury said through a spokesman that the sale would reduce Britain's stockpile from 715 tons to 300 tons over the next several years in what he termed a ''measured and phased program.'' The proceeds will go into United States, European and Japanese bonds.
Starting July 6, Britain's gold is to be auctioned in 25-ton lots to dispose of 125 tons a year.
Even though gold's allure has diminished, there's still plenty of it around. Above-ground gold stocks total 137,400 tons -- including 31,400 tons in official reserves -- compared with annual demand largely from the jewelry trade of 4,123 tons, according to Gold Fields Mineral Services. Gary Mead, head of research at the World Gold Council, said the annual demand was 1,000 tons more than mining output.

Media Doom Mongers
Way back in 1999, we were saying that gold was cheap, and a good buying opportunity. Most journalists, if they commented at all, were being very negative. One of the most memorable press comments was that gold had done nothing but gone down in price for the past 25 years.
It is always when everybody is at their most negative about a product, commodity, or share, that makes it the best time to buy.

Bank of England Gold Auctions
The Last Bank of England Gold Auction - 5th March 2002
The last auction in the second and final series took place on Tuesday 5th March 2002.
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.