Gold Hits 20-Year Low
Cause
In the late 1990s, the world was engulfed in the Dot-com bubble mania. In contrast, gold was viewed by many Western central banks as a "lazy" asset that yielded no interest and tied up capital. In May 1999, then-Chancellor of the Exchequer Gordon Brown announced that the UK would sell approximately 395 tonnes of its gold reserves (about half of its total holdings) to diversify into foreign currencies (US dollars, euros, and yen) to reduce the risk profile of its reserves. This decision reflected an extreme dismissal of traditional safe-haven assets.
Process
The UK government decided to sell the gold through public auctions and controversially announced the schedule in advance. This allowed market participants to short the market. The Bank of England conducted 17 auctions between July 1999 and March 2002. When the sale was announced on May 7, 1999, the gold price was around $282.40 per ounce. Under immense selling pressure, the price continued to fall, hitting a low of $254.85 in August 1999. The average price achieved across all auctions was roughly $275 per ounce. This historic low period became mockingly known in the financial industry as "Brown's Bottom."
Result
Following the completion of the sales, gold entered a massive, multi-year bull market driven by the 2000s commodities supercycle. By 2011, the price of gold surpassed $1,900 per ounce. The gold sold at the $270 level would have been worth tens of billions of dollars more had it been held for another decade. For average investors, accumulating physical gold near the 2000 bottom presented a near-zero risk, ultra-high reward investment opportunity of a lifetime.