by Egon Von Greyerz, Gold Switzerland:
Western Central Banks have a real knack for timing the sale of their gold reserves. They are absolute experts when it comes to picking the bottom of the gold market. Central banks in the UK, Switzerland and Norway, to mention a few, timed their sales to perfection. The only problem is that they all sold at the absolute bottom between 1999 and 2004. That was of course the time to buy gold and not to sell. But the Finance ministers in charge of Western economies have no understanding of economics. They don’t even understand that their absolute destruction of paper money is always revealed by the gold price.
U.K., Switzerland and Norway all sold gold at the bottom
As Central Bank heads were embarking on the biggest credit expansion and money printing in history at the beginning of this century, they sold the only asset that they should have held on to. The UK Chancellor of the Exchequer in 1999 was Gordon Brown. After a 20-year decline in the gold price he sold 58% or 395 tons of the UK gold reserves at between £160 and £185 per ounce. Today gold is £1,000 per ounce or almost 7x as high as when Brown decided to sell the UKs most valuable asset.
Brown’s disastrous decision to sell the gold at the bottom has cost the UK £10 billion
Switzerland which is a country that has very strong gold traditions also took the wrong decision a
t the wrong time. They sold 50% or 1,300 tons of their gold between 1999 and 2005 at an average price of CHF (Swiss Francs) 505 per ounce. Another 250 tons were sold between 2007-8 at CHF 780 per ounce. Today gold in Swiss Franc is 1,240 per ounce.
The gold that my Swiss compatriots sold would today have been worth CHF 34 billion more ($34B).
As the West is selling, the East continues to accumulate gold
But it is not just the fact that both the UK and Switzerland sold all their gold at the bottom. If they had understood the effect of their currency debasement policies, they would have bought gold instead of selling it. This is exactly what the Silk Road countries have done in this century.
As the West has been selling, China, India, Russia and Turkey have acquired 28,000 tons since 2000.
Finally, we have Norway which has never had significant gold holdings. But that didn’t stop them from selling all of their 33 tons of gold in 2004 for $450 million which is 1/4 of what it would be worth today. Like many countries which have acquired their wealth by luck or theft, Norway became rich beyond their dreams due to their oil discoveries.
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