Dow Jones reports that the United Kingdom announced today that it will sell 60% of its 715 ton gold reserve. According to the article, it will replace gold with currency assets.

Switzerland and the IMF also have plans to sell large amounts of gold, and those have been discussed on the forum weeks ago.

Comments by Puddintame: Government is normally completely incompetent in almost every undertaking; however, in this context, government may have such a load of evidence that the world will be in a deflationary period in the near future that even it (government) can't screw up.

The IMF gold sales are to reduce indebtedness of Third World nations, but I am confident that this deal was brokered by Western bankers, to whom the debt is owed, convincing the IMF to pay their precious money back (what's a few billion between friends?) with gold while the gold is still worth at least something.

If you're trying to follow the money, the money is turning into currency, not hard assets. Not gold. It remains to be seen whether Warren Buffett is right on silver. With all due respect, I think he's wrong.)

Before I get the gold bug flames, I am not advising anyone to avoid gold as a store of value. I think the age old advice of keeping 5 to 10% of assets in precious metals is hard to argue against. As you approach 30%, its getting riskier and riskier. Above that, you'd better be an experienced professional specializing in precious metals.

-- Puddintame (achillesg@hotmail.com), May 07, 1999

Answers

Thanks for the input you got me to hold off on a buy. BTW i am glad you provide your comments as well as many others who contribute thoughtful informative comments. Thanks to all of you. Lurker

-- Lurker (Properties@mindspring.com), May 07, 1999.

Puddintame, gold will find a bottom, it may be lower than many expect ($190-$200 an ounce) after which it will shine once more!!

Ray

-- Ray (ray@totacc.com), May 07, 1999.

Does anyone remember the depreciation figure (for gold) as a result of the aforementioned sale? Vaguely remember NPR commentator stating that it might induce a 2% price depreciation?

-- pdirac (pdirac@hotmail.com), May 07, 1999.

pdirac, I think the Dow Jones article quoted someone as saying 3%. Of course, if the stiff making the prediction knew what was going to happen in the future, he wouldn't have to get up early in the morning to talk to reporters would he?

-- Puddintame (achillesg@hotmail.com), May 07, 1999.

Puddintame

Gold sunk to historic lows recently driven by the gold carry trade, the Yen carry trad and gold shorts. Lots of government talk about selling gold has driven down the price. Paper assets like dollars, bonds, stock certificates, the pound, and the euro cost almost nothing to create and distribute. Governments will do almost anything to defend the value of their currencies. So, now we have the following situation:

* Y2K is going to severly affect some countries and economies * The Euro is essentially "at war" with the US dollar to become the world reserve currency. * There is a "bubble" (a 300 year old term) in US equity markets * The UK is not part of the Euro but is part of the EU. * In the last two reports on its reserve assets, the Fed went from 0 to $500 Billion in gold stock. * Gold starts rising slowly and then you get an announcement out of the blue of a big gold sale proposal, and unlike last year no evidence of a real sale.

This is manipulation. One does not buy high and sell at historic lows unless one is desparate. When a market is manipulated, one who buys the into the con and lets themselves be manipulated LOSES.

I don't know how this will play out, but buying at historic lows seems like a good idea to me - especially when I see governments and central banks at odds over everything except trying to get people (other than them) to not buy gold. My bet is that it will all unfold before the end of 2000 with the euro soaring or crashing linked to the outcome in y2K and the stock market. 30% in gold seems about right to me. I'm: 15% stock 30% gold (stock and physical) 15% commodities 10% short stock 30% money market

-- Noel (ngoyette@csc.com), May 07, 1999.

A 5 -10% precious metal accumulation is probably a good idea in normal times. A weeks supply of food is probably a good idea in normal times. One gallon of gas and 5 gallons of water is probably a good idea in normal times.

Question. Are we in normal times? Well, are we punk?

-- Clint (harry@dirt.com), May 07, 1999.

I'ld love to read that article. Is it online or in the WSJ? I don't see anything on pages A15 or C17.

I think it looks like the powers that be are trying to talk the gold market to death. Demand for gold coins is shooting through the roof and all the people that make their living dealing in dishonest money don't like that.

The IMF "news" is that it is "suggested" that the "proposed" selling of gold be doubled. Nothing near term about that. The Swiss selling will occur over a long period of time according to the Swiss. In a country whose age of banks is measured in centuries instead of decades, those sales aren't going to be just in the next quarter.

Looks like spin so far, plus these large gold sales will be in bars, not coins, when and if they do occur. Plus the mints are at 100% capacity at the moment.

Difference of opinion is what makes a horse race. What a horse race.

-- Ken Seger (kenseger@earthlink.net), May 07, 1999.

The UK selling 60% of its gold reserves?

If true, this is the most blatant example of trying to calm the crowd that I've ever seen. The current market is not conducive to liquidating over half of a country's reserves. Selling low is generally not considered smart.

Either this is a signal that the UK expects major deflation, or it's a signal to citizens that there is sure no reason to distrust currency.

-- Doug (douglasjohnson@prodigy.net), May 07, 1999.

I think you are all wrong. The inside crowd is looting all the national gold reserves and exchanging their soon to be worthless currency for gold.

-- doubting thomas (got gold@home.net), May 07, 1999.

Ken, the article is in the online WSJ Interactive Edition. Today's date. There are two articles online now. The new one is redundant.

There may certainly be some manipulation going on here. According to the article, 125 ounces will be sold in the next 10 months with the first auction on July 6. I do not understand why one would announce an intent to sell 415 tons of gold over a course of years. If not to scare off gold bugs, then maybe to prevent other sales by sovereigns or certain mining activity, thus limiting supply.

We all know that corporate stock buy-back announcements are basically a bunch of hooey. Rarely are they completed. It's interesting that the announced sale schedule extends beyond 1-1-2000. I assume that that all bets are off after that date.

Clint, you sound a little edgy this morning. Have some herbal tea, gaze at some crystals and think happy thoughts. I never have understood why you chose to live in San Fran.

-- Puddintame (achillesg@hotmail.com), May 07, 1999.

Puddintame,

Thanks for the great heads up on this gold matter. Since gold is a definite part of contingency planning for many of us, any current news or decoding of the presently crazy gold market is both timely and appreciated. Please keep us posted as best you can. Again, thanks.

-- Gordon (gpconnolly@aol.com), May 07, 1999.

1) Methinks the central banks doth protest too much.

2) The Brits are telling us to short their currency.

-- Nathan (nospam@all.com), May 07, 1999.

Gold is not "perfect" (nor silver, platinum, palladium). That being said, it is a tangible. It will likely have some value regardless of which way economies go. That is, it will likely always have some purchasing power for other goods, though that may vary and has varied.

Currency -- paper and electronic money -- has no value other than what a government can enforce through taxes. If an economy goes bust, currency values drop dramatically -- because both production of real stuff declines and so do tax revenues.

Even in "good" times, currency depreciates. Inflation supposedly is zilch. Cost of living (COL)is increasing. COL is what you see. Even at a "modest" 5% COL increase per year, your currency (savings) purchasing power will be halved in ~14.4 years (rule of 72/5).

Forget about valuing metal in terms of currencies
(e.g., US$290/oz. gold)

Forget about valuing goods in terms of currencies
(e.g,, US$1.50/gal gasoline)

Consider conversion to valuation of goods in gold
(e.g., $1.50/$290 = .0051724 -- .0051724 oz. gold/gal gasoline)

-- A (A@AisA.com), May 07, 1999.

Britain Shocks Market With Plan To Sell 415 Tons Of Gold - Price Slumps

5-7-99

LONDON (AFP) - Britain stunned world markets on Friday with a decision to sell more than half of its gold stocks from July in favour of holding cash.

The announcement astonished dealers on the gold market, prompting a dramatic slump in prices.

The gold spot price on the London Bullion Market fell below 280 dollars an ounce during the day, before picking up to 282.55 dollars on bargain hunting. The metal had closed at 288.75 dollars on Thursday.

The Treasury said that it planned to sell an initial 125 tonnes of gold this year.

Over three or four years, national gold reserves will be reduced by 415 tonnes to about 300 tonnes. The current 715-tonne stocks are worth 6.5 billion dollars, the government said.

The Bank of England will sell the gold at auctions to be held every other month, starting on July 6.

A Treasury spokesman said: "We are setting out for the market today where we want to end up and the pace we want to take it."

He said that the proceeds would remain in Britain's official reserves in the form of currency. "This is all about the structure of the family silver, not selling it," he said.

Britain is chasing "a better balance in the portfolio by increasing the proportion held in currency".

A spokesman said that the proceeds from the gold sales would be invested in foreign currency in the following proportions: 40 percent of receipts will be converted into euros, 40 percent into dollars and 20 percent yen.

Analysts were caught off guard by the announcement.

A precious metals analyst at Mitsui Bussan Commodities, Andy Smith, said: "Not many people in the market thought the UK would sell."

He said of the planned sale: "It's huge, it's incredibly important and the market has lost a lot."

An analyst at CRU Research house, Gillian Moncur, said that the surprise sale would likely herald further official gold sales around the world.

"Gold is becoming an outdated asset," she said.

The market has for weeks now been in a nervous state because of a number of international initiatives to sell gold.

The International Monetary Fund (IMF) said late last month that it will seek to ease poverty in the world's poorest nations by selling some of its gold reserves.

Several industrial countries, including Britain, the United States and Japan, have endorsed the sale of up to 10 million ounces of IMF gold to help the poor.

The prospect of IMF sales comes as Switzerland prepares to sell gold as monetary compensation for Nazi victims.

Switzerland has also pledged to sever the legal link between the Swiss franc and gold.

London insisted that its sale was not part of a coordinated move to reduce official gold reserves.

"This is not a coordinated move," the Treasury said.

But dealers braced for a flood of metal from the official sector.

GNI trading house said: "A series of sales from the BoE (Bank of England), coupled with sales from the IMF and SNB (Swiss National Bank) paint a clear indication that official sales will be at a high level for the next few years."

Managing director of Gold Field Mineral Services research group, Philip Klapwijk, added a note of calm.

"For the last 10 years, central banks have been net sellers and in that sense, it is not really surprising," he said.

Nonetheless, the British sale is important in global terms, coming in at five percent of annual gold production.

GFMS said that global mine production is 2,500 tonnes per year. The IMF said that global gold reserves stand at more than 100,000 tonnes, of which some 60,000 tonnes is held by the private sector.

The Treasury said that even after selling the lion's share of British gold, Britain would be left with enough precious metal to participate in the European single currency.

Had Britain joined the first wave of countries adopting the single currency, it would have deposited 140 tonnes of gold reserves at the European Central Bank, the Treasury said.

-- Andy (2000EOD@prodigy.net), May 07, 1999.

Okay, folks, as someone who hasn't had to worry about buying gold (having no real savings to speak of, and a very limited budget) how do you see this affecting the outlook for post-y2k economics? Are not the Brits setting themselves up for a tremendous hit, if deflation gets intense?

I guess my other concern here is that they're saying "okay sell the gold, we can always just declare it illegal to own once things get tough anyway"...or am I just being overly cynical?

Arlin

-- Arlin H. Adams (ahadams@ix.netcom.com), May 08, 1999.

Arlin, this pattern should be apparent to eeryone by now. the International bankers are looting the treasury's of their gold holdings, and converting their elctronic money to gold. The steady progression of countries liquidating their reserves is a dead giveaway that they are holding the price down to get maximum return on their money. I take this as a direct indicator that they are planning to totally collapse the worlds economy next year and are placing their assets into precious metals to ride out the storm.

-- Nikoli Krushev (doomsday@y2000.com), May 08, 1999.

Agree with Nikoli. This is a "banker's" move, not a "sovereign state" move. IMO, this is as important a sign of what the elite thinks is coming with Y2K as anything in the process so far.

-- BigDog (BigDog@duffer.com), May 08, 1999.

Arlin,

I don't think you are being overly cynical. It seems obvious that the international gold market is being manipulated. The question becomes, for what purpose and for whose benefit? I surely don't have the details, but this matter is being orchestrated at the *highest* levels of governments and international banking. There are some powerful people that don't want to see a lot of money being shifted into gold. Today's surprise anouncement came just as gold was going thru $290 oz.and forced it back down to $283 oz. That is not such a huge drop, but it is a stunning move into the area where the short sellers can save their skins. However, unless there is an attempt to make private ownership of gold illegal again (never say never) the continuous pressure on gold demand will cause a real blowout sometime in the next few months, but not before we see a few more surprises from the big players in an attempt to keep gold at rock bottom prices. At least that's the way I see it.

-- Gordon (gpconnolly@aol.com), May 08, 1999.

the golden rule. Lets not forget that the man with the gold makes the rules. What on earth makes you think that the value of gold will be upheld? Based on what? What intrinsic value does gold have. Can you you shave off the right sized piece for a loaf of bread? Or do you carry it in powder form? Don't forget your scales, certified of course because you don't want any questions about your honesty, although I'm sure there will be some doubters. And don't forget about those detectors. You know the ones that check for guns. I'm sure gold wouldn't be able to be detected. To me lead is a much more valuable than gold. For two reasons, lead is easier and less expensive to acquire, and you get much more bang for the buck.

-- realist (not on your best @.day..), May 08, 1999.

Tell you what realist, I'll give you the lead off my roof and from my pencil ;) for your gold sovereigns? Deal?

-- Andy (2000EOD@prodigy.net), May 08, 1999.

Andy To you whom I admire for your ablity to see through the fog. I have only one question what is the caliber of your roof? LOL You above all should know that the only value of anything is what it is worth. What if it is determined that gold is without value. And do you think that they wouldn't do that? Do you really think that the market is contolled by us? Excuse me, do you remember the term "sheckles" what are those worth?

-- realist (not on your best @day..), May 08, 1999.

I dinnae care what you think - GIMME DA GOLD!!! and I'll take my chances!

-- Andy (2000EOD@prodigy.net), May 08, 1999.

Dinna ken laddie Should have known you were from Aberdeen. The true home of a Scot

-- Realist (not on your best@ day...), May 08, 1999.

Actually,

Co. Mayo on the west coast or Ireland by way of London - but we're all Celts at heart :)

-- Andy (2000EOD@prodigy.net), May 08, 1999.

This is getting interesting. Let's look at some of the figures here.

"The (UK) Treasury said that it planned to sell an initial 125 tonnes of gold this year. Over three or four years, national gold reserves will be reduced by 415 tonnes to about 300 tonnes. The current 715-tonne stocks are worth 6.5 billion dollars, the government said."

Panic, panic, head for the hills, etc. and by all means "the little people" should think about selling some of that nasty gold they have now before it becomes worthless, and of course keep your money in the banks. Right...

"Nonetheless, the British sale is important in global terms, coming in at five percent of annual gold production. GFMS said that global mine production is 2,500 tonnes per year. The IMF said that global gold reserves stand at more than 100,000 tonnes, of which some 60,000 tonnes is held by the private sector." Whoopee! If production fell 5% for just one year the UK sales would be a wash. Think there might be a slight production hic-up 8 months from now?

Let's look at it from a different angle. The UK sales this year will be a whooping $1+B or so. Compare this HUGE amount of money to what was required to bailout LTCM. Like pissing in the wind. The "stunned world markets" "astonished dealers" "dramatic slump in prices" amounted to what, a terrifying plunge of 2.5%!!!!!!etc.!!!! Yawn... Anybody followed prices of internet stocks for a week? 2.5% in one day looks like optically flat by comparison.

We're drowning in adjectives here.....

-- Ken Seger (kenseger@earthlink.net), May 08, 1999.

"Several industrial countries, including Britain, the United States and Japan, have endorsed the sale of up to 10 million ounces of IMF gold to help the poor."

How much ridiculous propaganda will sheeple the world over have to consume before they realize the source of their suffering.

-- Puddintame (achillesg@hotmail.com), May 08, 1999.

Puddintame - The answer is they will consume it until they are dead.

Gillian Moncur - "Gold is becoming an outdated asset," she said.

This will go right down there with Keynes "that barbaric metal" or Eliot Janeway's pronouncement that Nixon's closing of the gold window (no longer selling gold for foreign dollars) would cause the price of gold to collapse and settle somewhere significantly below $32.oo per ounce.

-- Ken Seger (kenseger@earthlink.net), May 09, 1999.

I forget who said it, back in the 30's or so, "When the central banks start selling gold, it's time to start buying" :)

Yep - orchestrated manipulation.

Buying opportunity.

Anyone heard these rumours of a gold-backed DIGITAL currency planned for the aftermath of the self-induced chaos next year? It's making the rounds.

-- Andy (2000EOD@prodigy.net), May 09, 1999.