Reserve Bank sold most of the nation's gold reserves!!

THE Reserve Bank sold most of the nation's gold reserves more than a decade ago because the board believed its price would remain flat

They believed also the commodity would not play a role in a future financial crisis.

The decision to sell 167 tonnes of the bank's reserves has cost the nation about $5 billion based on today's soaring price of almost $1400 an ounce.

A board paper recommending the decision to sell conceded that gold served as "insurance against a breakdown in the international financial system", but it then dismissed the need for holding this valuable asset. The paper has been obtained by The Australian under Freedom of Information laws.

The paper also said Australia need not worry about selling the assets because it had vast reserves of the commodity, yet the latest figures from Geoscience Australia show that known reserves will be exhausted with 30 years.

The RBA revealed in July 1997 that over a six-month period, it had sold 167 tonnes, reducing Australia's reserves to just 80 tonnes. At this time, the value of its gold assets fell from $3.6bn to about $1.1bn.

The RBA's sales pushed the world gold price down to an 11-year low, returning just $2.4bn for the gold that was sold via a single broker engaged without a tender.

The same amount of gold would be worth about $7.4bn today.

The decision to sell the reserves was approved by then RBA governor Ian Macfarlane and then treasurer Peter Costello.

The paper justified the decision to dramatically reduce the bank's holdings by arguing that gold had been a poor investment, and that Australia need not worry about access to financial markets during another economic crisis.

Since this decision, the world financial system has suffered severe stress, first with the dotcom bust in 2000, then the 9/11 attack the following year and, more recently, the near collapse of the global financial system in 2008.

The spectacular rise in the price of gold in recent years shows that it is clearly playing a role in the GFC and its aftermath.

The RBA's public statement was co-signed by Ric Battellino, who is now deputy governor of the bank. At the time, he served as assistant governor for financial markets.

The RBA paper noted at the time that gold holdings in the US and Europe remained high, with the US holding 75 per cent of its reserve assets in gold.

"Central banks traditionally hold gold because of its ability to be used in the event of a crisis in the international financial system; it is the only reserve asset that is not a claim on some other government, international institution or bank. However, over the past two or three decades, the world has experienced a number of economic 'crises', but gold played no part in coping with them," the paper said.

The paper argued that continuing development of financial system meant that circumstances which would require Australia to call upon our gold holdings for economic reasons looked increasingly remote.

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• Costello
• $5bn
• Ian
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• Ric
• Battellino
• financial
• crisis
• sell
• international
• system
• most
• of
• nation's

[10iggi01]

The U.S. is probably in the same situation. They will not let anyone into Fort Knox where our gold is (supposedly) held. If they had nothing to hide, what is the harm in letting someone take inventory?

[alternativeangle]

@10iggi01 Yeah I agree its suspect that they don't let any one audit Fort knox, I think the US gold has been sold, probably got funneled back to European banksters.

[BookofNick]

Wow, I bet they are embarrassed about that. Is there any info available on who bought the gold? With that kind of volume, I'd guess the buyers would have to be other central banks...?

[alternativeangle]

@BookofNick Yeah good question mate. I'm not sure. but I think your right it would be other central banks. But it could be investment banks. Would be great to know.

[jeans423]

take away any ability to deal with finance crisis then replace with NWO cURREnCY?

[BiggerThinking1]

@lanastus123 EXACTLY! Why doesnt The Chaser chase down Costello and interview him on this howler of an economic management fuck-up! No doubt Costello would somehow pass it off whilst maintain that smug smirk!

[lanastus123]

But weren't Howard and Costello supposed to be the great financial managers? If we believe the BS spun by the coalition. This country is run by fools and idiots, The RBA and the government were so wrong then why should we believe them now. END the RBA now!!

[gettingahandle]

Not just dopey, culpable

[datzfast]

@imtangent thats stupid that would nean i and others could pick millions out of river banks , hey i just notice the are called banks , river banks.

[datzfast]

what is a reserve bank, never heard of it and we went of the gold standard in 1966

[imtangent]

LMAO, it is so stupid it is funny! It wouldn't be too late to buy it back (maybe)?! i see gold going to 2k+/oz. Thanks for the post mate!

[happymax1]

Hey Mate!!!... Here's what's going on with you blokes down under..... Australia was founded as a British Penal Colony.... Therefore, you're a bunch of crooks who have been robbed by a bunch of crooks who are the descendants of a bunch of crooks..... so waaaaaa..... and furthermore... you guys talk funny... Do you have a pet kangaroo? Nicole Kidman's pretty hot though (I'll give you that one) God Save The Queen!

[dawheele1]

Isin't Australia controlled by the UK and England? more precisely the Vatican. Didnt England (Gordan Brown) also say they sold off all their gold also at a loss? I think this is just their way of hiding the gold in some underground city that they have built so they can continue to sell the paper gold on the market when its really not their. Asses hording up treasure for the last days.

[carm3d]

Same thing here... our gold paid for Germany's reconstruction after WWII. Troops at Fort Knox are guarding an empty safe.