Today’s Daily Mail has a rare picture of the Bank of England’s Gold Reserves

You are looking at the room most likely to weather the credit crunch, a vast vault filled with the final word in financial security: gold.

As stocks and shares tumble, house prices crash and previously unassailable institutions crumble into dust, the sight of several thousand 28lb bars of 24-carat gold stored in the Bank of England’s massive underground vaults is hugely reassuring.

For as the world wakes up to the fact that securities and dodgy loans are turning out to be as solid as wet cardboard, good old-fashioned gold has come back into fashion as never before.

For as the world wakes up to the fact that securities and dodgy loans are turning out to be as solid as wet cardboard, good old-fashioned gold has come back into fashion as never before.

The first thing that came to mind when seeing this was the semi-empty shelves. This is the legacy of Gordon Brown’s ill-fated and now oft-criticised selloff of approximately 60% of The Bank of England’s gold reserves. The Spectator’s Martin Vander Weyer has probably the most incisive article on the debacle:

[…]But markets are not as simple as that. In reaction to the Treasury announcement, the gold price fell another 10 per cent before a single British ingot had been sold. There was also a storm of reaction from gold-producing countries – many of which happen also to be the highly indebted poor countries which Brown has been earnestly trying to help by promoting debt relief, but which were now forced to watch the value of their gold exports shrink and to start closing mines which are uneconomic at such bombed-out price levels. Thabo Mbeki, President of South Africa, where gold provides 300,000 jobs, described the sale as `potentially disastrous’. (There was another, slightly less convincing, storm of reaction from Eurosceptics, claiming that the sale was part of a plot to hasten the inevitability of joining European Monetary Union by stuffing our reserves with euros instead of gold.)

Having telegraphed his intention in a way that no seasoned trader ever would even announcing his precise timetable, 25 tonnes to be sold every two months – the Chancellor started a stampede of `shortselling’, as speculators sought to profit by driving the price down further. A longestablished mechanism of the gold market allows investors to borrow gold from central banks at modest rates of interest, sell it, then buy it back later at a lower price assuming the market price has continued falling in the meantime – in order to return it to the central banks on an agreed date (though the gold remains physically in the same vault throughout the game, which, like so much of modern moneymaking, takes place in virtual reality). This and other forms of trading hammered the gold price downwards throughout the summer: Brown’s first 25-million-tonne tranche, sold in July, achieved a price of $261.20 an ounce. His second, on 21 September, achieved $255.75, close to the metal’s 20-year market low.

The other thought that this picture evokes is what exactly are those P&O Ferries’ posters doing on the wall? Are they getting the gold in the mood for their world travels when Gordon Brown decides to sell them to far-flung nations?