Throughout history, gold has held an unshakable hold over the human psyche. From Midas to the Spanish Main, from Cecil Rhodes to… er, Spandau Ballet, gold has retained its allure. Auric Goldfinger was even prepared to render the contents of Fort Knox radioactive in order to profit from the resulting price hike. Of course, there have been periods in which it was deeply out of favour but it is a fact that across the centuries, gold has maintained its purchasing power.
Which is why most countries have, historically, held significant gold reserves. In fact, for many years the world’s major currencies were physically backed by it. It may have offered no income and cost money to guard and insure but gold was the ultimate store of value. Whatever happened to the value of paper currencies, gold acted as a bulwark against any number of potential disasters.
It is, therefore, disappointing (although no great surprise) that Europe’s central banks have sold the better part of 4,000 tonnes over the past decade. With gold at $1,100 per ounce, they have lost almost $50bn of potential value. Today, central bank sales have all but stopped and there are new buyers in town; the Chinese and Indian central banks have bought substantial amounts of late, no doubt concerned about the amount of confetti dollars being issued by the U.S. Federal Reserve. How ironic; politicians are responsible for selling the commodity that is the ultimate antidote to the frenzied borrowing and currency debasement they themselves now preside over.
Which brings us to one of the least successful central bank gold deals of recent times (and probably, any time), when the Prime Minister and erstwhile Chancellor offloaded half of the UK’s gold reserves at an average price of $275 an ounce. We did wonder whether it was, in reality, a devilishly clever scheme, the mathematics of which would befuddle Carol Vorderman and Stephen Hawking combined. Perhaps, due to derivative contracts, what at first sight looked like a crass bet against history was, in reality, a wonderful success. Alas, no. With ‘Brownfinger’ at the controls, there was more chance of Tiger Woods and John Terry working for Relate.
If only Mr Brown had waited a few years. He’d have got a far better price from paypeanutsforgold.com or any similar company, the adverts for which now clog T.V. schedules. You know the idea; you send them an envelope full of jewellery and they send you £3.75 less postage. Presumably, Goldfinger’s name resulted from Ian Fleming’s intention to convey, at least metaphorically, that everything he touched turned to gold. As for ‘Brownfinger’, good taste prevents us speculating further.
John Newsome can be contacted on: 01423 705123 or email:john.newsome@williams-im.com
