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Gordon Brown sold more than half of Britain’s precious gold bullion at the bottom of the market just before the price of gold started a decade of almost uninterrupted growth.

Or so the Tory attack line goes.

It’s a favourite of Conservative Party press officers, the Prime Minister and clueless commentators everywhere.

David Cameron used it in Prime Minster's questions last year to counter criticisms about the Royal Mail sell-off. He even called the two Labour Eds “muppets” because of their involvement with the sale.

Here’s a chart of the gold price which will excite whoever’s behind @CCHQPress :

Unfortunately for Tory press release writers, the story’s a little more complicated than that.

Why did Brown sell the gold?

Between July 1999 and March 2002 Gordon Brown’s government sold 395 tonnes of UK gold, about 58% of the government’s total reserves of 715 tonnes.

Brown’s justification for the sale was to diversify the country’s assets.

As Alan Beattie says in the FT , holding onto gold is a largely pointless activity for governments.

If you convert the gold to money you can at least earn interest and that’s what happened to the money which the government made from the sell-off: it was invested in foreign currency interest-bearing assets , 40% in dollars, 40% in euros and 20% in yen.

Fantasy-land losses from the gold sale

David Cameron and the Tories want you to believe that selling the gold in 1999 cost the taxpayer many billions of pounds. Here’s how his fantasy maths works:

Selling the gold at an average price of $277/oz made the government a total of $3.5 billion. With gold prices peaking at $1,780.65 the government could have made as much as $22.5 billion. But anyone who says they can predict the price of anything 12 years in the future is completely bonkers.

The difference between what he *could* have got and what he actually did is a big looking $19 billion. In pounds that's £12.4 billion.

Here’s that fantasy-land loss in a number:

$19bn Hypothetical losses from selling at $277/oz instead of the peak gold price in 2011.

Note that David Cameron cites a figure of £9 billion which comes from a Daily Mail story.

A more common sense analysis of the gold sale

The average price of gold in the three years after the sale was $376/oz. That’s still more than the $277/oz average sale price, but not much more. So in theory waiting a couple of years would have netted the Treasury $4.8 billion. That's $1.3bn (£0.8bn) more than he actually got.

Here’s this more common sense analysis of the loss in a number:

$1.3bn Hypothetical losses from selling at $277/oz instead of the average price over next three years.

That’s still a huge chunk of change but it ain’t £9 billion. It also doesn’t include any potential profit from the money we made from selling the gold. And it’s less than the estimated losses from the bodged Royal Mail sale.

Taking Cameron’s argument to its logical conclusion

If Ed Balls and Ed Miliband are “muppets” for the gold sale in 1999, what does that make Cameron?

According to Oren Laurent, chief executive of Banc De Binary:

"Gold prices have been on a downward trajectory since their peak in August 2011, after ten years of virtually uninterrupted growth”.

Why aren’t people angry that Cameron didn’t sell the rest of our gold at the peak price in 2011?

Here’s why:

Politicians do not and should not speculate with our gold

Here’s a chart of the UK’s gold reserves between 1957 and 2010. Note how since 1971 UK politicians have barely touched it, and for good reason.

The price of gold fluctuates wildly.

The Treasury’s latest update on the state of the Bank of England’s gold assets has this shocking line:

“Since 31 March 2013 the market value of gold has fallen. [...] we estimate that the impact on the Statement of Financial Position, as at 2 July 2013, to be a reduction of around £2.3 billion or 22%.”

We’ll repeat that: in the five months it took for the Treasury to write its report about our assets the value of our gold dropped by a fifth!

Did you know we sold half our gold in 1970?

Between 1970-71 the Bank of England sold nearly half of our gold reserves. Just like the Brown sell-off it was sold at a historic low of about $42.5/oz in October 1971. Only a year later it was worth $65/oz.

As Catherine R. Schenk says in her book about the global gold market:

“Picking the right time for portfolio changes is clearly challenging”

A gold-plated understatement if we've ever heard one.

The gold sell-off is just one of a string of billion pound mistakes

The punch and judy politics which we see at PMQs is a massive distraction from the real problem with our system of government.

Governments of every colour are constantly making mistakes that cost the taxpayer billions of pounds.

Ivor Crewe, the Master of University College, Oxford lists some of the multi-billion pound policy mistakes made in the last thirty years:

The poll tax aka “the classic policy blunder”

The bodged entrance and exit from the Exchange Rate Mechanism

Countless government IT failures like the cancellation of the NHS Patient Record System

The Millennium Dome mishap which cost £800m

The collapse of Metronet which cost £2 billion

The Assets Recovery Agency designed to get money back from criminals but which cost more than it ever obtained

The list goes on and on. Remember the £500 million the government wasted stocking up on Tamiflu?

So can we stop with the dunces and muppet talk, please?

The public is badly served by the utterly base level of debate by our leaders who know all too well that a loud argument will distract people from the true story.

A debate about how to fix things and stop blunders like the gold and Royal Mail sales might be boring, but it’s what the country needs.