Has the Bank of England Defaulted on Gold? It Wouldn’t Be the First Time
The Bank of England is one of the world’s most powerful financial institutions, trusted to store gold reserves for nations, banks, and institutions. But what happens when that trust is misplaced? If history is any guide, the Bank of England has a habit of treating gold like a magician treats a coin—now you see it, now you don’t.
Lately, the gold markets have been buzzing with reports of long delays in retrieving gold from the Bank of England’s vaults. Investors and governments looking to move their bullion to New York ahead of potential U.S. tariffs are finding that while their gold exists on paper, actually getting their hands on it is another matter. The Bank insists it has “plenty of gold” to meet demand—just don’t ask for it all at once.
This isn’t the first time the Bank of England has found itself on the wrong side of a gold crisis. Let’s take a trip down memory lane.
The 1931 Gold Standard Default
In 1931, Britain was still clinging to the gold standard—until it wasn’t. Faced with a financial crisis, the Bank of England simply stopped redeeming banknotes for gold, effectively defaulting on its obligations. Holders of paper pounds hoping to exchange them for gold were met with a polite but firm “no.” This marked the end of the UK’s gold-backed currency and a breach of trust that still lingers in financial history.
The 1968 London Gold Pool Collapse
Fast-forward a few decades, and the Bank of England found itself at the heart of another gold fiasco. As part of the London Gold Pool, the Bank and other central banks tried to keep the gold price fixed at $35 an ounce. But when demand for physical gold outpaced supply, the Bank of England played favourites, ensuring governments and elite institutions got their gold—while ordinary investors were left with empty hands. The system collapsed in 1968, and gold’s price was left to float freely.
The Brown’s Bottom Blunder (1999-2002)
If there were an Olympic event for selling low, Gordon Brown would have taken gold—literally. Between 1999 and 2002, under Chancellor Brown, the UK sold nearly 400 tonnes of its gold reserves at rock-bottom prices, averaging around $275 per ounce. Today, gold trades at more than ten times that amount. This wasn’t just bad timing; it was an outright gift to those who bought at the Bank’s fire sale.
The Venezuela Gold Freeze (2018-2019)
And who could forget when the Bank of England refused to return Venezuela’s 31 tonnes of gold in 2018? Citing political reasons, the Bank simply decided not to hand over the gold to Nicolás Maduro’s government. Regardless of one’s views on Venezuelan politics, this set a dangerous precedent: when you store your gold in the UK, you might not get it back if the powers that be decide you don’t deserve it.
What’s Happening Now?
With large amounts of gold flowing out of London, queues forming to borrow gold, and delays mounting, some are asking whether the Bank of England has overextended itself—again. Officials insist everything is fine. But then again, they said that in 1931, 1968, and 1999 too.
One thing is clear: when history repeats itself, those holding paper promises instead of physical gold tend to get burned. If you’re still trusting central banks to play fair with your bullion, you may want to ask Venezuela how that worked out for them.
As of February 16, 2025, the Bank of England is not in default. It continues to fulfill its financial obligations and maintains operations as the United Kingdom’s central bank. However, it’s Sunday, so there’s that.
Bill White Says…
“When a banker tells you your gold is safe, it’s time to check the exits. When he tells you it’s ‘plentiful,’ it’s already gone.”