Interesting to see a mainstream news organisation in Australia reporting on the state of the Reserve Bank of Australia’s gold reserves. The Wentworth Report’s David Evan summarised and commented on an article published by “The Australia” last week.
Check out David’s thoughts, then we’ll have some comments of our own at the end about New Zealand’s gold reserves…
In a vault deep in the basement of the Reserve Bank’s Martin Place headquarters in Sydney sits a hoard of gold bars worth about $US500,000 each — all four of them.
The RBA now holds almost the entirety of the nation’s gold in vaults administered by the Bank of England.
To add insult to injury to the nation’s gold devotees, the vaults are stuffed full of the redesigned $10 polymer banknotes awaiting official release in September. …
Australia sold its gold in 1997, in a sale timed to suppress the price of gold, to bury it forever, and replace it with government paper:
Then-treasurer Peter Costello agreed to sell most of its holdings in 1997.
The decision prompted cries of betrayal from the gold industry and, with the benefit of hindsight, was incredibly poorly timed. Since the sale of 167 tonnes of gold for $2.4 billion, or just over $400 an ounce, gold in Australian terms has rallied to record highs. The price peaked last July at $1819.44 an ounce, at which point the gold Australia sold for $2.4bn would have been worth $10.7bn. …
Australia is in the paper camp, with the monetary progressives:
The RBA’s current gold holdings, in the Bank of England’s vaults, now total just under 80 tonnes.
That’s less gold than is held by the central banks of Iraq, Poland and Romania, according to figures compiled by the World Gold Council, and is just a sliver of the amount held by similarly sized economies such as Spain (281.6 tonnes) and Russia (1706.8 tonnes).
Gold has been accepted as money most everywhere civilized for the last 5,000 years. Paper currencies come and go, usually ending in a storm of inflation and over-production to meet some crisis or other.
That storm will be on the West soon. We have record low interest rates, near zero, so next time there is a recession the only available tool for the central banks is “printing.” In addition, the debt load across society is greater by far than at anytime in history (courtesy of the great bubble, 1982 – 2008), and the temptation to inflate society out of its debt will become irresistible at some point.
Government got us into this mess, and government will keep digging until it collapses.
Here’s a link to the full article on the Australian Website. Although it is behind a paywall so may not open for you. Otherwise just search for: “Gold’s Demise Bar None. … Well, Four” and it will likely open from the search result.
(Also in case you’re interested, we’re pretty sure it’s the same David Evans of GoldNerds, that we’ve featured previously from his talks at the Gold Symposium in Sydney).
Why is that?
Because, unlike the US there is nothing to back this change with!
While Australia may have sold a very big chunk of it’s gold reserves in 1997 – 167 tonnes to be exact, with 80 tonnes remaining – the Reserve Bank of New Zealand managed to do even better.
New Zealand now has a grand total of 0 (as in zero) tonnes of gold.
This total of zero tonnes hasn’t changed since we wrote about it back in 2009. However we couldn’t recall exactly when it was sold. Helpfully the Reserve Bank Museum tell us that:
“Most of the gold reserves were divested in the 1960s. The last remaining gold was sold in 1991.”
So not only did we sell more gold than our trans-Tasman cousins, we also managed to do it earlier! Although at least we may have gotten a slightly better price than they did in 1997 on the 1991 sale. (But only slightly).
However we can’t say the same about the 1960’s sales. They took place when the US Dollar was still linked to gold at $35 per ounce. So the bulk that was sold in the 1960’s would have net just $35 per ounce at whatever the USD/NZD exchange rate was at the time.
Check out the chart above though. Considering how much the gold price rose from 1970 to 1980 – peaking at over US$800 per ounce, the sale of the bulk of New Zealand’s gold in the 1960’s would have to rival “Brown’s Bottom” for the worst timed gold sale ever!
(Brown’s Bottom refers to the sale of the U.K.’s gold by Chancellor of the Exchequer (similar to our Minister of Finance role) Gordon Brown in 1999-2002. Pretty much at the lowest point for gold in 20 years and just as gold was about to start rising.)
But all is not lost – as there is an answer to the issue of New Zealand not having any gold reserves…
We don’t know what the future will hold. We don’t know what the monetary system will look like, but odds are that in the next decade it will have undergone some serious change.
There are a lot of technological changes going on currently but the only currency that has stood the test of time for Millenia, will likely still be around and of value (and likely more valuer than today) in 10 years.
So it seems like a good idea to create your own gold (and silver) standard. Become your own central bank and start your own gold (and silver) reserves.