Gordon Brown sold Britain's gold at a knock-down price

On 7th May 1999 the British Government under Gordon Brown, announced a restructuring of the UK’s reserve holdings to achieve a better balance in the portfolio by increasing the proportion held in currencies. Since that time a total of approximately 395 tonnes of gold has been sold at 17 auctions, run by the Bank of England on the Treasury’s behalf. The first auction took place on 6th July 1999 and "the program" concluded with the 17th auction on 5th March 2002.2002 report by the HM Treasury


I just finished reading a July 5 2012 news story carried in the Telegram, reported by Thomas Pascoe who worked in both the Lloyd's of London insurance market and in corporate finance before joining the Telegraph. In which he said that a great deal of Gordon Brown’s economic strategy would strike a sane man as troubling.

Here are some highlights from his blog at The Telegram

One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.

One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade. In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.

Once control of the gold had been passed over, the bank would then immediately sell it for its full market value. The proceeds would be invested in an alternative product which was predicted to generate a better return over the period than gold which was enduring a spell of relative price stability, even decline.

At the end of the allotted period, the bank would sell its investment and use the proceeds to buy back the amount of gold it had originally borrowed. This gold would be returned to the lender. The borrowing bank would trouser the difference between the two prices.

This plan worked brilliantly when gold fell and the other asset – for the bank at the heart of this case, yen-backed securities – rose. When the prices moved the other way, the banks were in trouble.

This is what had happened on an enormous scale by early 1999. One globally significant US bank in particular is understood to have been heavily short on two tonnes of gold, enough to call into question its solvency if redemption occurred at the prevailing price.

Read More Here

Related Document in PDF Review of the sale of part of the UK gold reserves

Any guesses as to the particular USA bank referred to? Feel free to comment on this post.

I like this quote from Thomas Pascoe " It was a lesson which could have acted to restrain all players in the credit market boom of the 2000s. It was a lesson which nobody learnt.

Large Unexplored Quartz Vein System In Manitoba

A day to remember ... Not many veins exist that a person can actually lean on 

Back in 2007 while staking mineral claims west of the Rice Lake Gold Camp in Manitoba we experienced a bit of a heat wave when temperatures hit above 40 degrees C, and I found myself needing to take a break from making "claim posts" and cutting lines.

At the time the crew and I were carrying out a project and staking an area of about 38 sq miles, or just over 98 sq km's. Needless to say, it was hard work as there were many kilometers of lines that required cutting / blazing and there were hundreds of post markers that had to be completed.

That particular project required that land package be divided into 38 individual mineral claim blocks with each requiring that wooden marker posts be erected every 400 meters along each and every line. We staked over 240 km of boundary and erected and recorded over 350 individual claim posts along those boundaries.

We found ourselves a bit over worked about mid day and worried about heat exhaustion or worse. I decided that the best course of action was to take a break and get out of the heat. I got on the radio and talked with the crew and we agreed to shut down work and take a break. We headed for the nearby lake to cool off and relax a bit, have a lunch and to do things other than work, until the heat diminished some.

To me relaxing in the bush involves a dip in the water, a lunch and a leisurely "walk about" prospecting and looking at the geology, nature and stuff like that. I just have to be moving but mind you I would rather be walking about and prospecting "nice and slow" in that kind of heat.

Cat seen in Manitoba

During that opportunity "to walk about" I happened upon an outcrop of "Greenstone" that hosts a series of hydrothermal vein systems ranging in size from about 1 inch wide up to the width seen in the photo above and somewhat "bigger" a few paces back along strike.

This vein structure is located in a part of the region of Manitoba where the Rice Lake Greenstone Belt is in contact with structures of North Caribou terrane. The visual evidence indicating that can be identified easily if you carefully prospect and visually map the area.

I prospected these veins only in a general manner at the time "casually", yet i managed to get 'a kick" of gold along with some notable numbers for other metals from assay later. I didn't have the time to get back and do a detailed prospecting survey yet . Time and finances were not aligned with my desire to explore it at the time. I did get a day back there last year, in which I gathered a few more samples and later got some assay work done on. Those results indicated significant gold numbers in some samples and also well above background in others.

Yes, there could be a nugget effect happening within some of the assay samples and the results have been very high on selected samples, however on a chip sample over 2 meters the results were still very promising. It is far to early to determine what style or amount of gold occurs here let alone beginning to understand the where for all as to how the gold was deposited.

One of the very few records available on the area indicates that not far from this vein structure, a drill core was made in the past, that reported a gold assay exceeding 1 ounce per ton over a length of 25 feet of core, beginning from surface.

Today in 2012, we have a situation where gold prices have climbed and many new gold discoveries have been made in the area and have been proved to be occurring in similar type geology. Yet, this structure still exists and is still unknown and under explored. I am sure that I will explore it when time and resources permit.

If you wish contact me, I'll be selecting a partner willing to take some risks in exploring this and other occurrences. Not large risks are needed, but a risk none the same, so if you you are not prepared to support or prospect this, or can't get it in your budget to do so, don't worry, there are always other things to do.

This area is now being recognized as one of the very few grass root gold exploration targets remaining under explored in Manitoba. Junior gold exploration companies have taken notice of the area and there is a modern gold mine and milling complex operating close by. Within the Rice Lake Gold Camp San Gold Corp has recently made significant new gold discoveries.

Mining Companies See Billions in Value lost

The mining sector's bellwether companies were all beaten down on Thursday as the price of metals and minerals continued to slide and economic indicators from across the globe painted a bleak picture for the mining industry.

The market was very much influenced by several things, among them:

Bad news out of China and a new survey that showed manufacturing activity in the country is set to decline for the eighth month in a row in June.

The same survey conducted in Europe also released on Thursday supplied more reasons to sell – Europe’s banking and sovereign debt crisis is now dragging down even the powerhouse of the region Germany with factory output contracting at its fastest pace in three years.

As if that was not enough US manufacturing data released as the New York market opened also indicated an already tepid recovery was losing steam.

More at Mining.com

Not very good news for prospectors or anyone in the mining industry. We'll have to keep our boots to the ground and wait out the storm.

The Case of 480,000 oz. of Klondike gold

Found an interesting write up at Mining.com, the story is about a decade old court case over salvage rights to 480,000 ounces of gold. Yes nearly a half million ounces of Klondike gold!

At $1600 us per ounce that haul is worth about $768,000,000 ! Can you imagine finding that! What would that experience feel like, and no wonder it took a decade to settle it.

The steamship SS Islander carrying the gold from the Klondike and sank near Juneau, Alaska, August 15 1901. The ship was full with passengers, mail and 480,000 oz. of gold bullion. The SS Islander was favoured by businessmen and wealthy since it was better outfitted than most vessels.

Around 2 a.m. on Aug. 15 the Islander hit an iceberg in Lynn Canal, south of Juneau.Within five minutes, the bow was completely underwater making the ship inoperable. The boat sank 15 minutes later. Forty people lost their lives.

When the boat sank, salvage was not possible due to the depth and low temperatures under the water. A salvage company did managed to raise two thirds of the hull in 1934 but 60 feet of the forward hull section, the heavier part of the boat, broke away and stayed on the bottom.

Both Ocean Mar and Yukon Recovery made separate expeditions in the '90s and discovered the hull section independently leading to the dispute.U.S. District Court Judge H. Russel Holland said Ocean Mar located the vessel first, disappointing rival company Yukon Recovery.

Read the Story - Link at Mining.com

The following article is re-posted here in it's entirety as is from ArticleCity.com in accordance with their permission and policies. I like the content and the straight forward manner in which the author Brian Cheek presents the infomation.


Should I Buy Gold?
 by: Brian Cheek

Investors often ask me, " Should I buy gold ?" The answer is simple, in my opinion: Gold should be a part of every investor's portfolio. Whether or not you believe gold is going to appreciate short term or not is a matter for speculators, but smart investors who want a diversified portfolio will want to own gold for its protective qualities. Gold is a wonderful diversifier, and it offers protection against many adverse events in the marketplace, as we will discuss below.

Why Should I Buy Gold?

Gold adds another layer to a portfolio filled with stocks and bonds. Gold is a completely different asset class than stocks are. Even the ETF that trades like a stock behaves like godl because it is tied to the price of bullion. When compared to the stock market, gold has behaved in a roughly inverse fashion to the stock market since 1971 when the gold standard was abandoned. For traditional buy and hold investors, gold can provide returns when the stock market underperforms.

Gold Offers Protection of Value

Gold protects against inflation. Inflation occurs when the money supply is increased, causing each unit of currency to be worth less. Then this happens, prices for goods and services will rise. This will cause the price of gold to rise as well, because it will take more of the dollars (which are each worth less due to inflation) to buy an ounce of gold. The stronger the inflation, the faster gold will rise. Many investors keep some gold in their portfolio for just this reason.

Gold Investors are Prepared for Disasters

Since the economy of every nation (and the worldwide economy) is based on trust, it can collapse when that trust is eroded. Think about this: the paper that money is printed on is not worth anything. It is worth value because of the trust that people have in the government and the economic system. As soon as a nation defaults on its debt, the money becomes worthless-it is literally not worth the paper on which it is printed. Gold, however, will always be worth something. In this way, it is currency. So, some people like to have gold around as a protection against a bank failure, a war, civil unrest, or severe political climate changes or any other disaster that might cause a currency decline or failure. Indeed, history shows that when a nation is facing war, economic or political uncertainty, or a financial crisis, the demand for gold rises sharply.

Know Your Investment Strategy

You have to decide what type of investor you are, so that you can determine how to work gold into your portfolio. For instance, if you are risk averse, and you do not want to store gold in your house, then you may want to get a gold account, gold certificate, or buy shares of the gold ETF. If you feel gold will appreciate in the long run, and you want to reap higher rewards, you can invest in mining stocks and the gold miners ETF, both of which are leveraged, meaning they multiply advances and declines in the gold price. For a buy and hold investor with average risk tolerance, 25-30% of a portfolio invested in gold is reasonable. A more speculative investor may choose to hold a higher percentage in gold, and use more leveraged instruments like gold stocks and futures. There is no right or wrong amount of gold to hold. There is only the amount that is right for you.

Knowing Where to Buy Gold

Owning gold has never been easier than it is today. Once you know your strategy, then you can start to pick out which investment vehicles make the most sense to you. There are many ways to own it, several of which can be done with clicks of a mouse. You can, of course, opt for gold bullion or gold coin ownership. If you want to own it but have someone else take possession of it, then gold accounts and/or gold certificates are for you. If you want to trade it like a stock, then the gold ETF will be your choice. For those who want a little more risk with the potential for higher rewards, there are gold mining stocks, the gold miner's ETF and leveraged ETF funds.


About The Author

Brian is an expert on gold investing and gold prospecting. His website, The Gold Spot is a comprehensive guide for gold investors and gold mining hobbyists.

For more information on gold buying decisions, go to Should I Buy Gold?
Visit the author's web site at: http://www.the-gold-spot.com

Article Source:
http://www.articlecity.com/articles/business_and_finance/article_10948.shtml

Gold Mining Museum in Dahlonega Georgia

I recently ran across this interesting video about gold mining and the Museum in Dahlonega Georgia. I thought that it was worth sharing. I really like the information provided on historical mining in the area and the very first gold rush in North America. This is a good presentation on old mines and equipment that are over 100 years old and still operating!
Hope you enjoy it.

There is a short advertisement at the beginning  that plays before the video, it comes from the source.

Link To Video of Museum in Dahlonega Georgia