Monday, July 18, 2011
Gold rush
I was reminded yesterday of one of Gordon Brown's bigger gaffes as Chancellor of the Exchequer, the time when he sold off a huge chunk of the country's gold reserves at a rock bottom price.
Wikipedia records that between 1999 and 2002 Brown sold 60% of the UK's gold reserves shortly before gold entered a protracted bull market, since nicknamed by dealers as Brown Bottom.
The official reason for selling the gold reserves was to reduce the portfolio risk of the UK's reserves by diversifying away from gold. The UK eventually sold about 395 tons of gold over 17 auctions from July 1999 to March 2002, at an average price of about US$275 per ounce, raising approximately US$3.5 billion. By 2011, that quantity of gold would be worth over $19 billion, leading to Brown's decision to sell the gold being widely criticised.
In 2007, the Times estimated that Gordon Brown's actions cost the taxpayer an estimated £2 billion. Last Thursday the price of gold reached its highest point of $1,590 per oz, around £985 per oz. Those 395 tons would have been worth much more now.
Wikipedia records that between 1999 and 2002 Brown sold 60% of the UK's gold reserves shortly before gold entered a protracted bull market, since nicknamed by dealers as Brown Bottom.
The official reason for selling the gold reserves was to reduce the portfolio risk of the UK's reserves by diversifying away from gold. The UK eventually sold about 395 tons of gold over 17 auctions from July 1999 to March 2002, at an average price of about US$275 per ounce, raising approximately US$3.5 billion. By 2011, that quantity of gold would be worth over $19 billion, leading to Brown's decision to sell the gold being widely criticised.
In 2007, the Times estimated that Gordon Brown's actions cost the taxpayer an estimated £2 billion. Last Thursday the price of gold reached its highest point of $1,590 per oz, around £985 per oz. Those 395 tons would have been worth much more now.
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I recall reading someplace (not sure where) that China is purchasing gold at a high rate (I think they increased their gold reserves to or by 65 billion US dollars) and plan to increase their gold reserves eight fold. This sounds like a huge amount of gold, but China's reserves are (again from memory, so I might be wrong) are something like 3.5 trillion US dollars, i.e., China has bought up a lot of other countries treasury bonds/debt such that China is a banker to much of Europe and certainly with respect to the USA.
Because of debt concerns the USA is about to make massive cut backs in defense spending ... while China is spending a lot of money on new boomers (nuke subs) and aircraft carriers.
I've been saying this awhile, we in the West (USA/EU/UK/Wales) need to rethink our way of doing business. Those western economies unable to export back to China will increase their national debt. The solution is staring us in the face, but we continue to hide from the truth: we are going down the tubes if we don’t innovate and export whereas China, despite the stereotype that it is incapable of innovation, is doing just that and increasing its patent filing rate at an exponential rate.
China has cornered the 'rare earth metal market' in part because government regulations made it very difficult to continue mining rare earth metals in the United States; consequently China is sucking in hi-tech manufacturing operations that require easy access to such elements to manufacture advanced electronic products. The WTO recently found against China for imposing quotas on rare earth metal exports, but the damage has been done to the world economy; it will take several years to get rare earth mines reopened and running in the west (the USA has finally got the message and is frantically trying to reopen mines and new rare earth mining facilities, but meanwhile the West is beholden on China which will probably work to frustrate the WTO ruling.
China is now so advanced that it can buy a Russian advanced fighter and improve it and resell it around the world much to Russia's annoyance.
In fact China recently purchased a Russian aircraft carrier and intends to build a fleet of aircraft carriers.
Meanwhile the EU/USA is getting into more and more debt. The solution is staring us in the face: innovation and exports ... which is the focus of modern day China ... in case anyone hasn't noticed China is now the #2 economy in the world in terms of GDP and exports.
India’s hi-tech economy is also on a positive trajectory – the USA is seeing many of its immigrants from India pack up and return to India – where employment and opportunities for Indian engineers is booming. CW
Because of debt concerns the USA is about to make massive cut backs in defense spending ... while China is spending a lot of money on new boomers (nuke subs) and aircraft carriers.
I've been saying this awhile, we in the West (USA/EU/UK/Wales) need to rethink our way of doing business. Those western economies unable to export back to China will increase their national debt. The solution is staring us in the face, but we continue to hide from the truth: we are going down the tubes if we don’t innovate and export whereas China, despite the stereotype that it is incapable of innovation, is doing just that and increasing its patent filing rate at an exponential rate.
China has cornered the 'rare earth metal market' in part because government regulations made it very difficult to continue mining rare earth metals in the United States; consequently China is sucking in hi-tech manufacturing operations that require easy access to such elements to manufacture advanced electronic products. The WTO recently found against China for imposing quotas on rare earth metal exports, but the damage has been done to the world economy; it will take several years to get rare earth mines reopened and running in the west (the USA has finally got the message and is frantically trying to reopen mines and new rare earth mining facilities, but meanwhile the West is beholden on China which will probably work to frustrate the WTO ruling.
China is now so advanced that it can buy a Russian advanced fighter and improve it and resell it around the world much to Russia's annoyance.
In fact China recently purchased a Russian aircraft carrier and intends to build a fleet of aircraft carriers.
Meanwhile the EU/USA is getting into more and more debt. The solution is staring us in the face: innovation and exports ... which is the focus of modern day China ... in case anyone hasn't noticed China is now the #2 economy in the world in terms of GDP and exports.
India’s hi-tech economy is also on a positive trajectory – the USA is seeing many of its immigrants from India pack up and return to India – where employment and opportunities for Indian engineers is booming. CW
# posted by 
: 12:24 PM
: 12:24 PM
You would have a perfectly valid point, Peter, had you had the superior foresight at the time.
How much gold did you buy at the low price and how much profit have YOU made?
How much gold did you buy at the low price and how much profit have YOU made?
# posted by : 12:54 PM
: 12:54 PM
Anon (12:54 PM)> I know a Welsh Labour guy who has been buying gold slivers for some time now. He goes on about some machine you can buy them from. I have never seen such a machine in the flesh, but hey, I'm a poor Welsh guy/alien living in New York (actually Washington DC, well in that area). (PS no longer an alien, I've gone native.) cw
PS The Labour guy's penchant for real gold (Au) is safe with me. cw
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PS The Labour guy's penchant for real gold (Au) is safe with me. cw
# posted by : 8:58 PM
: 8:58 PM<< Home
