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
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
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
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