The Brown Bottom

From my friend Derek Bond …

With the gold price hitting new nominal highs, now may be a good moment to remind ourselves about the consequences of Gordon Brown’s sale of much of the UK’s gold reserves.

Between 1999 and 2002 he sold 395 metric tons of gold at an average price of $275 an ounce.

Today the price stands at $1,749 an ounce.

No wonder Brown’s sale on the gold price charts is known as The Brown Bottom.

He also gave notice to the market that the sales would take place, thereby giving market participants every opportunity to drive the price down further.

Here are some calculations of the value which would have been accrued if we still held the gold today:

                                         Sold then             Value now
                                       1999 - 2002                2011
Quantity sold tons                  395                        395
Average price $/oz               $275                     $1,700
Sum realised US$m            $3,477m               $21,492m
Exchange rate                       $1.52                    $1.63
Sum realised £m                   £2,287                 £13,185

The 2012 Olympics are estimated to cost some £9 billion, so we could have paid for the Olympics with the amount of value he surrendered and had over £2 billion in change left.

p.s. at the 10 year anniversary of the sale in May 2009, the loss was only £3.9 billion [Ed: did someone just say 'only']