March 04, 2016

Why is Canada a country with no gold?

Brian LilleyArchive

Many of you emailed me about the shocking headline that said Canada had sold off all of its gold reserves. Are we being ripped off? Will this hurt the Canadian dollar?

Headlines aside, this isn’t very big news because Canada had very little gold reserves. Most was sold off during the Mulroney and Chretien years. Justin Trudeau’s new government is just finishing the job.

The Canadian dollar hasn’t been backed by gold since the depths of the Great Depression. We left the gold standard in 1933, almost 40 years before the Americans abandoned it in 1971. Since then Canada has been a fiat currency, traders decide the value of the currency, not the amount of gold in federal vaults.

As for recent events, I’m told all of the money is going back into the international reserves and not being used in general revenues to prop up Trudeau’s spending binge and deficits.

So while I’m saying there is no reason to panic because we had so little left any way, I do find this odd.

Canada is still a major gold producing nation, some rank us the fifth largest producer in the world and our mining expertise is exported to many other countries. We’re big players in gold and yet the government has no physical gold assets.

On November 4th, 2015, the day the Trudeau government was sworn in, the finance department’s international reserves report showed we had $110M US worth of gold. A month later it was $102M US. By January we were down to $58M, $24M in February and now nothing.

It is puzzling, and is something I’ll keep looking into.

Through the Harper years, there were no wild sell offs. There were ups and downs in the value of gold as the price went up and down but no wild sell offs. Now within four months of Trudeau taking office, all the gold is gone, sold off quickly and the question is why?

We don’t have all the answers…..yet.

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commented 2016-03-09 16:54:02 -0500
We have Notes… no currency…. Canada Bank is not Canadian own… it affiliated with the Federal reserved……. go figure
commented 2016-03-07 17:55:34 -0500
The question is not what is the best single investment over the long run.
The question is whether or not it is a good idea to have some gold in your portfolio.
Over the last three months gold and gold stocks have outperformed the market. Gold is a store of value. To that end gold is being bought as a hedge against falling paper currencies.
Equities are the better long term investment but they do not go up in a straight line and their true value depends on the strenth of the underlying currency by which they are valued.
commented 2016-03-07 14:47:16 -0500
Bill Elder wrote «I liquidated “funds” which have since been proven to either under perform or crash and bought gold @ $342/oz (no not certificates) and sold at near peak»

Indeed, you have the attitude of an old person. Over the very long term, the return rate on gold is almost exactly the same as the rate of inflation. That’s why there’s an old saying from the 1800’s that one ounce of gold will buy you a very nice suit. Still true today. If we look at the history of gold, you will see lots of booms and busts for its inflation-adjusted price:

You’re claiming to have timed the gold market pretty much perfectly. In principle, one could do that with the stock market also. Or you could just buy into the stock market over the long term, since it returns much more than gold. Over the last 30 years, gold went from US$349 to US$1268, a return of 263%. Over the same period, the TSX went from 2,856 to 13,357 with an additional ~2% dividend per year, for a total return of 666%. I’m pretty sure the DOW has done a lot better. So, gold as an investment sucks pretty badly unless you’re able to time the market perfectly, which few mortals can.

I haven’t been a student in a long time (though I spent 23 years being a student), though through investing in the stock markets I have enough outright cash that I could retire today, even though I’m decades away from the normal retirement age. The solid long-term return of stock markets isn’t a theory; it’s a fact. Same as the long-term inflation-only return of gold is a fact.
commented 2016-03-07 12:06:11 -0500
Dr. Genius commented – Bill Elder wrote «Gold is a universal standard of exchange» “Your comment is just wall-to-wall nonsense.”

Not to all the central banks fleeing to gold now to stabilize their currency and liabilities and certainly not according to my own portfolio when I liquidated “funds” which have since been proven to either under perform or crash and bought gold @ $342/oz (no not certificates) and sold at near peak- I retired on the gains.

As for any pissing match you may want to engage in, I could care less about “macroeconomis” studies, I was a player in the markets putting my savings/earnings out there and winning for the most part, not a theory-spewing student who thinks econ 101 makes them an expert in anything other than gaming public systems.
commented 2016-03-07 10:46:25 -0500
Until JESUS CHRIST returns, gold has been the human standard in general .
When you see our enemies buying up gold it’s because they got a plan.

They will institute a "real " world reserve fund. Bottom line, we won’t be part of it .
Canada and the USA and the U.K. Are hopelessly in debt.
They will tell us what they will pay us for our natural resources,and yes that includes oil and gas
So it doesn’t matter that we think gold is useless, it’s that our trading enimies think otherwise.
commented 2016-03-07 10:01:39 -0500
Nothing made my morning like reading this…….

Dr. Genius commented – “Gold is essentially useless,”
Coming from someone that no doubt has the utmost faith in a fiat paper currency.
Maybe Dr.Genius, you should do a little economic research on the past “currencies” and fallen empires.
Greece, Rome, Germany and countless other nations that had to default on their fiat currency.
Defaults….coming to North America faster that we think, lol.
commented 2016-03-07 05:05:44 -0500
Not only does Canada have no gold, it will very shortly run out of most of its loonies.
With two glaring, unstoppable exceptions.

Those insane loonies who insist that Canada borrows money and borrows more and more and then spends all it has borrowed with nary a word about paying back what it owes.
Yes we will be left with two incorrigible spendthrift loonies, Trudeau and Wynne.
They are not satisfied that this country has not enough ways to spend its loonies, but they even invent additional ways to disburse it and burden its citizens – tens of thousands of indigent, always indignant and demanding, self multiplying so called refugees.
commented 2016-03-06 15:37:32 -0500
Bill Elder wrote «The Minister of Finance (a politician) holds ( in trust for the public) the entire share capital issued by the bank – he creates economic policy in council with the appointed head of the BOC – yeah, pretty independent.»

The BOC is an arms-length government agency. Its main purpose is to set monetary policy such as interest rates, money supply, and the fractional-reserve rate to maintain economic objectives like economic growth and low inflation. The Governor of the bank makes final decisions independently of the Minister of Finance, which is a good thing considering the job is way too important to be placed in the hands of pandering idiots that need to get re-elected every four year. Mind you, there is a mechanism for the Minister of Finance to issue an “instruction” to the Governor, but this mechanism has never been used — because all hell would break loose if it were.
commented 2016-03-06 15:11:03 -0500
Bill Elder wrote «Gold is a universal standard of exchange»

Your comment is just wall-to-wall nonsense. Gold is not a standard of exchange; currency is. You can’t take a bar of gold to a grocery store to buy food. Currency is backed by the full faith and credit of a government and economy. Gold is just pretty, with only one use besides looking pretty (microscopic amounts are used in electronics). Central banks don’t use gold at all. It’s an asset held by governments, though not a great asset since its value fluctuates quite widely, though it’s been pretty stagnant for the past few years. Also, for the past decade or so, when the stock markets have fallen, gold has fallen right along with them, making it not much of a hedge, either. Central banks alter interest rates, money supply, and other parameters of monetary policy if they want to influence the value of their currency (which they generally shouldn’t care much about, anyway). Gold has nothing to do with it. The value of gold to miners is to pull something that’s inherently worthless and pretty much useless out of the ground and sell it to stupid foreigners for lots of money. It’s good that the Canadian government isn’t among the buyers. You should really take a course in Microeconomics so you might better understand what you’re trying to talk about.
commented 2016-03-06 13:09:00 -0500
Dr. Genius commented – “Gold is essentially useless,”

So is paper money, and every other non tangible investment device. Gold is a universal standard of exchange that unlike these other non tangible tradable devices, is finite and that supply equates to the demand value. It is a universal refuge from failed non tangible investments/assets. It’s where central banks go to shore up underperforming or devalued currency. “so if we are mining it and selling it to the outside world, then that’s wealth from the outside world being transferred inside Canada — at no particular cost to us. "

Well there is a cost to everything, even in the worker’s utopian collectives – our cost is first the productivity, investment and risk in locating, extracting and refining the metal – of course the real question is WHO is selling/being being paid for this gold we export, and in what medium of trade we accept in exchange – that makes all the difference between profit or loss.
commented 2016-03-06 12:55:10 -0500
Nathan W commented – " Wow. The conspiracy theorists and economic ignoramuses are out in full force today. "

You certainly are, how’d those poorly performing hedges, equities and bonds work out? How do banks respond to poorly performing currency and investment markets? What’s that? Yeah, they buy gold. Of course this escapes blowhards who have never been in the commodities markets let alone understand anything about economics or investment that didn’t come from the Huffington Post – I’d further hazard to speculate your investment net worth is less than $1000 – at least by the way you talk with such uninformed certainty. At any rate, attempting to find interest bearing investments that outperform gold in accruement and stability involves RISK – particularly in an up-gold market – but budgets and finances take care of themselves – so goes the selfie economic acumen of PM free tokes

Love this uneducated zinger: "The central bank is independent. "

The bank of Canada was legally designated a federal Crown corporation like the CBC. The Minister of Finance (a politician) holds ( in trust for the public) the entire share capital issued by the bank – he creates economic policy in council with the appointed head of the BOC – yeah, pretty independent. You seem as vacant as your home boy PM Selfie
commented 2016-03-06 11:04:50 -0500
«some rank us the fifth largest producer in the world and our mining expertise is exported to many other countries.»

That’s a good thing. Gold is essentially useless, so if we are mining it and selling it to the outside world, then that’s wealth from the outside world being transferred inside Canada — at no particular cost to us.
commented 2016-03-06 01:56:21 -0500
Trudeau found the formula to turn gold into carbon.
commented 2016-03-06 01:10:39 -0500
Gold is high, the dollar is low – gold is not high on the trailing average. But this from the guy who thinks you have to run deficits to have liquidity in the markets. shakes head
commented 2016-03-05 22:29:34 -0500
Wow. The conspiracy theorists and economic ignoramuses are out in full force today.
commented 2016-03-05 22:18:13 -0500
The central bank is independent. Gold is high, the dollar is low, and its a great time to sell, consistent with the long-term stated objectives of the central bank to prefer interest-bearing assets.

And essentially fact-based article, but you just can’t resist the temptation to build in the maximum number of digs at JT that you can.
commented 2016-03-05 20:20:49 -0500
My Grandson got it right, I mentioned at the dinner table that Canada has sold all it’s Gold, my son asked where did it go? My grandson said, I know where it went, the Pirates took it. I had to say to him you don’t know just how right you are, young man.
commented 2016-03-05 19:25:22 -0500
Trudeau Senior sold Canada out to the Central Bankers, so Trudeau Junior is just following suit.
A traitor
“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and he carries his banners openly. But the traitor moves among those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not traitor, he speaks in the accents familiar to his victims, and he wears their face and their garments, and he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of a city, he infects the body politic so that it can no longer resist. A murderer is less to be feared.” – Cicero, 42 B.C.
commented 2016-03-05 19:19:53 -0500
The answer is simple Brian ,since we have rejected tangible valuation pinned to our currency, we will valuate our currency with the number of “like” clicks we get on our official looney facebook page – Sunny ways economics Brian.

If anyone cares to know the correlation between gold reserve assets to our dollar value you will see a distinct trend on any line chart that parallels our gold reserves to dollar trading value – most notably in 1960 when both reserves and dollar value peaked – each sell off transferring gold to debt/credit instruments resulted in a vale crash then a period of instability, overall the dollars value has lowered with our metal reserves. More than coincidence when you consider the gold was traded for investment products which were not as stable as gold over the long term.

Normally if we didn’t have the trade deficit we do this would be disastrous,(90% of our GDP is exported) it doesn’t hurt our productivity to discount the dollar but most of our imports are consumer goods and fresh produce – so poor dollar performance impacts the consumer markets negatively. Money market pundtts have been predicting a long period of stag-flation when our dollar returns to historic lows – it seems to be travelling that way now ad we are beginning to see a slowdown and failures in Canadian retail chains.

Cross your fingers and hope Sunny ways economics go no further on “liquidating” national assets.
commented 2016-03-05 18:24:06 -0500
$110 million even in US$ is nothing..we now have graduated to billions in spending on “refugees” alone.. and if you listen to a bernie sanders, millionaires get no mention.. its the billionaires baby.. nothing to see here..
commented 2016-03-05 16:53:34 -0500
not only has gold been sacrificed on the alter of selling out this country but cash is going the same direction. soon we will have these implanted micro chips, driverless vehicles and no constitutional rights. welcome to the new world order.
commented 2016-03-05 13:24:36 -0500
Money has to come from somewhere to pay for all of the liberals over spending. Next I suppose they’ll start selling crown land. Sad thing is the money that their making for it seems to all be going over seas. Looks like the liberals are moving to liquidate Canada. It’s not enough they already tax the air we breath (carbon tax) so they’ll sell out the whole damn country from underneath us.
commented 2016-03-05 11:29:25 -0500
Not just sold off quickly, but quietly as well. Is gold a contributor to global warming or is the government going to use the proceeds to mask the true deficit numbers(a la the Ont Liberals sale of Hydro One)?
commented 2016-03-05 10:30:47 -0500
Junior’s Heavy Metal criticism for selling gold:

Gold is a Heavy Metal. Heavy Metal is a music genre that involves real men and real women. We live in a society that is all transgendered, and should be Justin Bieber fans. Therefore gold represents an outdated version of music representing an outdated concept of gender, so must be sold off to more represent today’s sunny society because it’s still pretty close to 2015.

Junior developed this music theory when skiing Whistlers last weekend and taking in some smoke, second hand of course.
commented 2016-03-05 10:22:18 -0500
Junior’s Science regarding gold sell off:

Gold is a heavy metal in the same period as lead. Lead is a by-product of uranium fission. Uranium fission is an energy source. Energy is derived from hydro-carbon. Hydro-carbon is bad because St Motorbike and friend Butt told Junior so. Therefore, gold is bad because it is carbon emissions in disguise and government policy is to reduce hydro-carbon emmisions hence the ridding themselves of gold.

Hey! I’m not saying the above is real science, just that it is the settled science informing Junior.
commented 2016-03-05 10:05:28 -0500
I just don’t understand why so many intelligent people miss the obvious…….gold is priced in… is bought with….gold is sold for…..paper currency.

Anytime gold is cheap….you are not permitted to buy it…..anytime it is really expensive….they hard sell it like life insurance…..

Buying gold when the price is this high is for suckers….so what should the government do……expropriate it under eminent domain?

When the gold standard was in effect it was illegal to posess any significant amount of it.

If in a SHTF scenario I have $1000 worth of salt and my neighbour has $1000 worth of gold….within a period of weeks I will own most of the gold in exchange for very little of the salt.

The notion that we are on the verge of a Hungarian style hyperinflation is snake oil.
commented 2016-03-05 07:32:26 -0500
Junior definitely pillaged it for “Syrians”, green energy, “infrastructure”, and buying off people/padding pockets, but that’s besides the point.

In the event of an American currency collapse, we are all totally up the creek now. Liberals think nothing bad happens on a large scale, but collapses have occurred in Argentina, Russia, Zimbabwe, et cetera. It can happen to us. The key cause is extreme government overspending and corruption, which we and the Americans now have in spades.

Hope you guys know how to grow fodder veggies, fish, snare, set broken bones, run a watch schedule, et cetera. Those are some of the skills you may end up needing to practice.
commented 2016-03-05 07:09:07 -0500
counting down the days.
commented 2016-03-05 02:26:25 -0500
Gold has been in a bear market for four years. It was due for a bounce. It does appear that Junior has sold the last reserves at the wrong time as gold bottomed late last year. As others have noted there is more paper gold now than physical gold.

I get the fact our currency is not based on gold, but the common wisdom in investing is that everyone should have some gold or gold mining stocks in their portfolio as part of o diversified portfolio. I guess Junior’s trust fund has someone else managing it. Daddy probably didn’t trust him making financial decisions. Maybe daddy wasn’t as stupid as I thought.
commented 2016-03-05 00:16:14 -0500
Sure gold is ~$1260USD—but that is a lot more in CAD these days. Gold is a hedge to hyperinflation of a fiat currency. If the Canadian dollar’s value is reduced to 30 cents for example, gold will still maintain it’s value, and at 30 cents $1260USD gold is pretty expensive. Yes, perhaps we are the 5th largest gold producer, but you still have to buy the gold from the producer—it’s not owned by the government. Or we can nationalize our mines—that works so well in communist countries. While gold doesn’t officially back currency, it is in itself currency. That’s how it’s traded—the industrial use of gold in minimal by comparison. China is the biggest buyer of gold in the world; they’re also the the biggest buyer of US bonds. Any correlation? Of course. If the US dollar goes down the toilet, China will have stockpiles of gold to hedge the investment; meanwhile Canada will be @#$’d.