Judge and Jury: The Government has slipped up badly trying to offload its gold - The Government’s handling of the gold sell-off completely disregarded the first rule of auctioning - build it up, never knock it down, says Nick Denton, director of t

Gold has always been an emotive issue. Just recall Humphrey Bogart’s eyes in the Treasure of the Sierra Madre as he stumbles toward the gold in ’them thar hills’. Governments also have a habit of stumbling when they deal with gold - whether it’s leaving the gold standard or selling an investment that has performed significantly worse than other asset classes in recent years.

Gold has always been an emotive issue. Just recall Humphrey

Bogart’s eyes in the Treasure of the Sierra Madre as he stumbles toward

the gold in ’them thar hills’. Governments also have a habit of

stumbling when they deal with gold - whether it’s leaving the gold

standard or selling an investment that has performed significantly worse

than other asset classes in recent years.



Reserve asset management needs discreet handling with communications to

match, and this is the Government’s normal practice - after all, when

did you last take any notice of a shift in our reserves?



So why did the Government declare its hand before it dealt, signalling

its intent and timing so precisely - very useful for other players in

the market and disastrous as a trading strategy?



Of course we live in the age of transparency, but this is taking it to

the extreme. From the announcement in May, things were only likely to

get worse.



The media has had a field day with the gold price hitting record lows, a

Southampton jeweller taking the Government to court, and a cacophony of

international protests. Then there has been the myriad of conspiracy

theories. Was the Chancellor front-running the sale of gold he had

inspired?



Was this another plot to get us into the euro? All, doubtless, were

without a grain of truth.



So the sell-off could have been handled a lot better in communications

terms, even with the Government feeling obliged to disclose its

intention.



In any auction there will be some negative reasons for the sale.

Communications should show the positives, bring out the best features of

the asset up for auction and create some perception of demand - much as

was achieved for a generation of UK privatisations, helped admittedly by

opposition cries of ’crown jewels at rock bottom prices’.



The only message that has come over loud and clear is that investment in

gold has not been a good idea. What most commentators see as a perfectly

good investment decision has become a useful stick for the media and a

variety of interest groups to beat the Government with during the course

of the next four auctions. And in the process, there has been the loss

of a cool pounds 450 million from reserves - now that’s something to get

emotional about.



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