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Bill Bonner: Selling gold was worst trade of the decade
China's gold reserves double in value
By Peter Klinger
The Times, London
Saturday, March 25, 2006
http://business.timesonline.co.uk/article/0,,13132-2102426,00.html
China has put Gordon Brown's investment philosophy to shame by
enjoying a near-doubling of the value of its gold reserves.
The people's republic has gold reserves worth $10.8 billion (6.2
billion), based on yesterday's $558.60 gold fix in London, compared
with about $6.6 billion at the end of 2002, when China last
increased its stake.
The Chinese central bank holds 600 tonnes of gold, according to new
figures from the World Gold Council, the gold industry's marketing
arm.
China almost doubled its gold reserves to the 600-tonne level
between 2000 and 2002, at a time when the chancellor was a bullion
seller.
British taxpayers missed out on 3.6 billion (2.1 billion) worth of
gold profits because Mr. Brown sold most of the country's reserves
during the 1998-2002 gold price slump.
Mr. Brown's dismal record is matched only by his counterparts in
Switzerland and the Netherlands, which have been among the most
active sellers of gold over the past five years.
Switzerland's decision to sell 908.3 tonnes of gold between January
2002 and March 2005 has cost it about $8 billion in forgone profits.
Its central bank will argue that the selloff was part of a strategy
to diversify its foreign reserves. Unlike Britain, Switzerland still
has a sizeable gold holding of 1,290 tonnes, worth $23.1 billion.
China's fiscal leaders, on the other hand, held on to their bullion
investment. In the late 1990s and early 2000s the gold price was at
its lowest level in 20 years, but it has since recovered to trade
near 25-year highs. The surging price of gold has been driven by
uncertainty about the state of the American economy and by booming
demand for jewellery.
Britain has kept 310.8 tonnes of gold, worth $5.6 billion, a
relatively small holding compared with most Western European
countries. Gold reserves make up 11.6 percent of the UK's total
foreign reserves.
America, the world's biggest economy, also heads the list of nations
placing their faith in the precious metal. America's gold reserves
are 8,135 tonnes, worth $146 billion and accounting for 73.2 percent
of America's total foreign reserves. The central banks of Germany
and Italy are similarly fond of gold as a prudent investment, and
alongside France, which has reduced its gold holding, hold more than
half their total foreign reserves in gold.
Investor interest in gold was reinforced yesterday by the 6 percent
surge in AngloGold Ashanti's New York share price to $51.41. The
shares are trading about $21 higher than a year ago.
The positive reaction followed confirmation from Anglo American, the
London-based diversified mining group, that it would reduce its
stake in AngloGold Ashanti from 51 percent to as low as 41 percent.
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