The Bank of England has the dubious honor of selling off the bulk of its gold holdings just as the market for bullion was making a bottom after 20 years where its primary direction had been lower after setting a peak in 1980.
Its contention at the time was it could get much more income on its reserves if they were in paper assets.
At the time, many of Europe’s central banks shared that view, but were smart enough to sign what was called the Central Bank Gold Agreement.
This was to set a ceiling on their annual sales of 500 metric tons of the precious metal reserves in order to prevent the price from being pushed down further.
Well, that part worked.
Hardly had the ink dried on the agreement in 1999, than gold turned around. (Actually it was in 2001 when the market finally found its bottom between $250 and $260 a troy ounce.)
This week the World Gold Council says participants in the current agreement have sold almost no gold in the past year. The quantity of sales fell by 96 percent to 6.2 tons.
Now the conventional central bank view of gold has either changed or it looks so indefensible that they are acting as if it has changed.
Which do you think it is?