pywong
31st August 2010, 06:10 PM
This is an interesting titbit. The sale of Malaysian gold was also around the time of LTCM collapse.
Fleming is critical of Gordon Brown’s decision as Chancellor, in 1999, to sell more than 400 tonnes – about half – of the Bank of England’s gold reserves in a series of auctions and buy foreign currencies. The move was controversial, as the gold price hovered around an average of $275 an ounce, and it met with considerable opposition from the Bank of England. “It was an astonishingly imprudent mistake,” Fleming says.
According to Fleming, manipulation of the gold market by governments is nothing new: he argues that it occurred as early as the mid-1930s, when Franklin Roosevelt forbade private gold ownership, apart from jewellery. As for Gata’s hypothesis that central banks still engage in covert manipulation of the gold market, he feels that all currencies, not just gold, are regularly manipulated by the monetary authorities.
. . .
The recent rumours of manipulation first arose in 1998, following the collapse (http://www.jamescox.com.au/the-collapse-of-long-term-capital-management-hedge-funds-and-leverage/) of the hedge fund, Long Term Capital Management (LTCM). One tale sent into cyberspace by Gata was that LTCM was short of more than 400 tonnes of gold at the time of its implosion. Gata questioned, too, whether the gold auctions the Bank of England arranged in the wake of that collapse were orchestrated to aid bullion banks’ efforts to cover gold short positions. LTCM, however, denied the allegations.
LTCM’s former lawyer James Rickards later told the Financial Times: “Gata raised this in 1998 out of thin air. It fitted their paradigm that central banks always and everywhere manipulate the gold market. As counsel, I wrote a letter including a sworn affidavit from a principal, rejecting the allegations and demanding a retraction. They printed the letter as ‘proof’ of the gold conspiracy. I gave up at that point because I realised they were not persuaded by evidence and I did not want to engage further.”
With hindsight, it is clear that Gordon Brown’s decision to auction off such a large chunk of the UK’s gold reserves at such a low-price was ill-advised. But the official aim of the programme was to shift more of the reserves into foreign currencies and other assets which bear interest. A report on the sale of the gold reserves conducted by the National Audit Office in January 2001 concluded that the auctions were “conducted according to current notions of best practice” and emphasised that central banks in Canada, the Netherlands, Switzerland and Malaysia disposed of gold around the same time.
Fleming is critical of Gordon Brown’s decision as Chancellor, in 1999, to sell more than 400 tonnes – about half – of the Bank of England’s gold reserves in a series of auctions and buy foreign currencies. The move was controversial, as the gold price hovered around an average of $275 an ounce, and it met with considerable opposition from the Bank of England. “It was an astonishingly imprudent mistake,” Fleming says.
According to Fleming, manipulation of the gold market by governments is nothing new: he argues that it occurred as early as the mid-1930s, when Franklin Roosevelt forbade private gold ownership, apart from jewellery. As for Gata’s hypothesis that central banks still engage in covert manipulation of the gold market, he feels that all currencies, not just gold, are regularly manipulated by the monetary authorities.
. . .
The recent rumours of manipulation first arose in 1998, following the collapse (http://www.jamescox.com.au/the-collapse-of-long-term-capital-management-hedge-funds-and-leverage/) of the hedge fund, Long Term Capital Management (LTCM). One tale sent into cyberspace by Gata was that LTCM was short of more than 400 tonnes of gold at the time of its implosion. Gata questioned, too, whether the gold auctions the Bank of England arranged in the wake of that collapse were orchestrated to aid bullion banks’ efforts to cover gold short positions. LTCM, however, denied the allegations.
LTCM’s former lawyer James Rickards later told the Financial Times: “Gata raised this in 1998 out of thin air. It fitted their paradigm that central banks always and everywhere manipulate the gold market. As counsel, I wrote a letter including a sworn affidavit from a principal, rejecting the allegations and demanding a retraction. They printed the letter as ‘proof’ of the gold conspiracy. I gave up at that point because I realised they were not persuaded by evidence and I did not want to engage further.”
With hindsight, it is clear that Gordon Brown’s decision to auction off such a large chunk of the UK’s gold reserves at such a low-price was ill-advised. But the official aim of the programme was to shift more of the reserves into foreign currencies and other assets which bear interest. A report on the sale of the gold reserves conducted by the National Audit Office in January 2001 concluded that the auctions were “conducted according to current notions of best practice” and emphasised that central banks in Canada, the Netherlands, Switzerland and Malaysia disposed of gold around the same time.