The United States is currently the largest holder of gold in the world. The US Treasury is currently sitting on 261.5 million ounces. Multiplied by roughly $1100 per ounce, we’re talking about a stash worth almost $300 billion at today’s prices.
In an article today at CNNMoney, we learn a few interesting things about our gold holdings, including several reasons for why the Treasury will not sell any of it, despite the fact that it is no longer used to back the currency. These reasons range from the psychological impact on the dollar, to the advantages us selling would give to competitive nations to the fact that what’s $300 billion when our economic problems are in the trillions.
I thought that his reason was the most interesting:
Another reason for Treasury to hold tight is gold’s fluctuating price. Just ask British Prime Minister Gordon Brown. When Brown was the nation’s chief finance minister a decade ago, he decided that gold had become relatively useless to the government — without the gold standard, it was just an inert metal, and it was expensive to store.
Brown sold off 400 tons, or 60% of the United Kingdom’s gold, between 1999 and 2002. Brown’s problem: Gold was selling at a record low inflation-adjusted average of $275 an ounce at the time. It turned out, had he waited 10 years, the U.K. would have made four times what it hauled in from the sale.
“Geithner doesn’t want to be the Treasury secretary that sells gold at $1,100 an ounce and next year it’s at $2,000,” said Shelton.
Yeah, nobody wants to “pull a Gordon Brown” these days.