The yellow metal began a long upswing after the UK government sold half our reserves. Adrian Ash looks back
London dealers called it “appalling”; gold-mining bosses “bloody unhelpful”; and tabloid front pages “catastrophic”. Central bankers in Europe were outraged. So was Parliament. The UK Treasury – run by Gordon Brown, New Labour’s “iron chancellor” – had suddenly declared on Friday 7 May 1999 that the British state would sell up to 60% of our gold reserves, starting two months later. The gold price sank by 3% on the news, on the way to two-decade lows soon called “the Brown bottom” by bullion traders.
“Why so fast, and why so much?” demanded one Conservative MP. The short answer was Switzerland. Three weeks earlier, gold’s fifth-largest national holder had voted to remove the franc’s gold backing in law. That enabled the Swiss National Bank to start selling on to a bullion market already depressed by other Western central banks’ heavy and growing sales.
But the longer answer – and the one that matters today, 25 years later – was the “end of history”. That phrase, in which “end” meant “aim” rather than “finish”, had been used by US political thinker Francis Fukuyama to describe the victory of Western liberal democracy over Soviet Communism in the early 1990s. Blue jeans and free markets had won. And just as the inevitable “new world order” of international peace and justice rested on US military might, so the newly global financial system had experts to run it.
“Who needs gold when we have Alan Greenspan?” asked The New York Times, just three days before the British announcement. Western stockmarkets were hitting record highs under the famously intellectual (and incomprehensible) Federal Reserve chairman. Gold had sunk after the White House, in March 1999, backed French and UK calls for the International Monetary Fund to fund Third World debt relief at the millennium by selling its gold reserves.
The US Treasury, funnily enough, didn’t join the trend. Moreover, “Fiat money, in extremis, is accepted by nobody. Gold is always accepted”, as Greenspan himself had said a few years before. “The traditional reasons for holding gold have included the war-chest argument,” added the UK Treasury in its 7 May press release. But who in spring 1999 feared extreme events, never mind war, when our side kept winning?
