Today's sale was the first of 125 tonnes to be sold from the British reserves over the next twelve months. Some questions arise about the strategy and timing, as gold closes at $257.80, still another 20-year low.

The long-awaited auction has finally come and gone, and not a moment too soon. No other event in the gold market in the last 25 years has been as anticipated as this gold sale. This series of announced British gold auctions will transform the once-mighty reserve of gold which was the Treasury of the British Empire, into the more modern concept of wealth, i.e., a balanced mixture of the world's fiat currencies.

So who exactly bids at an auction of 25 tonnes of gold? Of course, the major buyers are central banks and other international monetary institutions, but in fact these auctions are open to anyone bidding through the members of the London Bullion Market Association www.lbma.org.uk), subject to their credit guidelines. Bidding is in multiples of 400 ounces, and the gold is stored in London. The next sale is Tuesday, September 21, 1999, unless political pressure halts these sales. You can keep up with the Bank of England's public activities at www.bankofengland.co.uk.

So what really happened today? Well, on a positive note for the gold market, the 25-tonnes brought very close to the current 'spot' price of gold, rather than some sharp discount to current markets that some had feared. And the bidding was said to total bids for some 130+ tonnes, a 5.2 times over-subscription that some gold bulls took to be a good omen that signaled strong and deep demand.

The over-subscription was, however, just a natural occurrence at any auction. There are always under-bidders who bid low hoping for a bargain, and thus the 5.2 times may just reflect a lot of rock-bottom 'bargain-hunting' bids.

Of course, the whole auction in a way is a bargain at current spot prices. Before the May 7th announcement of the sales, gold was trading at nearly $290 per ounce. The Brits themselves drove this market lower with their sale announcement and, many think, got just the price they deserved.

"Selling gold by public auction on pre-announced dates is exactly as damaging to the market as it would be if the British government were to pre-announce sales of yen or Swiss francs and hold those sales of yen or Swiss francs by public auction." Commented Kelvin Williams, executive director of marketing for AngloGold Ltd, South Africa's leading gold mining company.

As an aside aimed at the gold carry-trade and its huge short position in gold, Williams said, "We would stick with the view that the method is naïve and I think the fact that the Chancellor has been advised by a major bank which does trade in gold has given concern to some people." Which is a roundabout way of saying that these auctions serve the interests of the bullion banks who profit from short-side trading in gold, and don't actually serve England very well at all.

Time will tell. The fact is, Britain is selling its long-held gold reserves at the lowest prices in twenty years.

Imagine the outrage in the U.S. if the Treasury Department announced that they would start selling the gold reserves held in Fort Knox, to the highest bidder, in a series of scheduled public auctions during a period of historically low gold prices.

How, exactly, did the British allow this to happen?