Sale of UK gold reserves, 1999–2002

The sale of UK gold reserves was a policy pursued by HM Treasury over the period between 1999 and 2002, when gold prices were at their lowest in 20 years, following an extended bear market. The period itself has been dubbed by some commentators as the Brown Bottom or Brown's Bottom.[1][2][3][4][5][6]

Gordon Brown, the Chancellor of the Exchequer at the time, was principally responsible for the decision.

The period takes its name from Gordon Brown, the then UK Chancellor of the Exchequer (who later became Prime Minister), who decided to sell approximately half of the UK's gold reserves in a series of auctions. At the time, the UK's gold reserves were worth about US$6.5 billion, accounting for about half of the UK's US$13 billion foreign currency net reserves.[7] There are various later estimates of the cost of that the decision to British taxpayers, for example £2 billion (The Sunday Times, 2007) and £7 billion (The Daily Telegraph, 2010).[1][8]


The UK government's intention to sell gold and reinvest the proceeds in foreign currency deposits, including euros, was announced on 7 May 1999, when the price of gold stood at US$282.40 per ounce[9] (cf. the price in 1980: $850/oz [10]) The official stated reason for this sale was to diversify the assets of the UK's reserves away from gold, which was deemed to be too volatile. The gold sales funded a like-for-like purchase of financial instruments in different currencies. Studies performed by HM Treasury had shown that the overall volatility of the UK's reserves could be reduced by 20% from the sale.

The advance notice of the substantial sales drove the price of gold down by 10% by the time of the first auction on 6 July 1999.[1] With many gold traders shorting, gold reached a low point of US$252.80 on 20 July.[9] The UK eventually sold about 395 tonnes (12,700,000 ozt) of gold over 17 auctions from July 1999 to March 2002, at an average price of about US$275 per ounce, raising approximately US$3.5 billion.[9]

To deal with this and other prospective sales of gold reserves, a consortium of central banks - including the European Central Bank and the Bank of England - were pushed to sign the Washington Agreement on Gold in September 1999, limiting gold sales to 400 tonnes (13,000,000 ozt) per year for 5 years.[7] This triggered a sharp rise in the price of gold, from around US$260 per ounce to around $330 per ounce in two weeks,[7] before the price fell away again into 2000 and early 2001. The Central Bank Gold Agreement was renewed in 2004 and 2009.


Brown's actions have attracted considerable criticism, particularly concerning his timing, his decision to announce the move in advance, and the use of an auction. The decision to sell gold at the low point in the price cycle has been likened by Quentin Letts[11] to the mistakes in 1992 that led to Black Wednesday, when the UK was forced to withdraw from the European Exchange Rate Mechanism, which HM Treasury has estimated cost the UK taxpayer around £3.3 billion.[1]

It has also been argued that the sale of the gold reserves was a positive decision in that gold had been historically under-performing and was paying no dividends to the Exchequer and the sale enabled the UK Government to pay off a substantial part of the national debt and keep repayment interest rates down on the remainder.[12][13]

As of December 2013, the UK retained a gold reserve of 310.3 tonnes (9,980,000 ozt).[14]

See alsoEdit


  1. ^ a b c d Watt, Holly; Winnett, Robert (15 April 2007). "Goldfinger Brown's £2 billion blunder in the bullion market". The Sunday Times. London. Archived from the original on 11 May 2008.
  2. ^ The outlook for gold, The Daily Telegraph, 19 December 2008
  3. ^ The Gold Bull Market Remembers How Gordon Brown Sold Half of Britains Reserves at the Lowest Price, The Market Oracle, Clive Maund, 1 April 2007 Archived 26 November 2010 at the Wayback Machine
  4. ^ The Significance of the IMF-RBI Gold Sales, Tim Iacono,, 5 November 2009 Archived 24 February 2014 at the Wayback Machine
  5. ^ In 2008, Gold Should Glitter, James Turk, SFO Magazine, February 2007.
  6. ^ China & IMF Gold Sales; The Real Story, Warren Bevan,, 23 June 2009 Archived 12 March 2013 at the Wayback Machine
  7. ^ a b c Review of the sale of part of the UK gold reserves (PDF), HM Treasury, October 2002, archived from the original (PDF) on 2013-04-21
  8. ^ Watt, Holly; Winnett, Robert (24 March 2010). "Explain why you sold Britain's gold, Gordon Brown told". The Daily Telegraph. Retrieved 28 April 2022.
  9. ^ a b c Gold: Does Gordon Brown's regret selling half of Britains' gold reserves 10 years ago?, The Daily Telegraph, 8 May 2009
  10. ^ Chart of gold 1968–99
  11. ^ "Brown's badly-timed sales of gold reserves cost Britain more than Black Wednesday".
  12. ^ "Britain was right to sell off its pile of gold". Financial Times. 4 May 2011.
  13. ^ Kamm, Oliver (5 May 2015). "Brown's golden shot was not the miss his critics would have you believe". The Times. London. Retrieved 15 February 2019.
  14. ^ "Gold Demand Trends Q4 2013", "Top 40 reported official gold holdings" is on page 18 of the pdf file.