In a shocking development the government of Canada has sold off the vast majority of its gold reserves.
The Department of Finance announced on February 3rd that the country’s gold holdings had fallen to just0.62 tonnes. This equates to less than 0.1% of the country’s total reserves.
Canada’s entire hoard of gold is worth just US$24 million. There are dozens of properties in Vancouver now worth more than our entire country’s stash of gold. So, why is Canada selling all its gold?
A spokesperson from the Minister of Finance stated that:
“The decision to sell the gold was not tied to a specific gold price, and sales are being conducted over a long period and in a controlled manner.”
source: http://globalnews.ca/news/2508940/canada-sells-nearly-half-of-all-its-go…
In a Global News article, economist Ian Lee of the Sprott School of Business at Carleton University, explained that Ottawa has no real reason to keep its gold reserves other than adhering to tradition.
source: http://globalnews.ca/news/2508940/canada-sells-nearly-half-of-all-its-go…
I find this troubling and painfully ironic given the fact the school from which the economist hails is named after famed base and precious metal investor Eric Sprott. Sprott has remained adamant about the importance of gold and silver in an investor’s portfolio, particularly in recent years.
Canada Sells Gold | reserves pitiful compared to foreign countries
Below are a list of major countries that seem more than content to hold a significant portion of their foreign reserves in gold.
India currently holds 557.7 tonnes of gold, representing 6.8% of its foreign reserves. The Netherlands has 612.54 tonnes of the precious metal, accounting for a whopping 54.1% of its foreign reserves. The little banking powerhouse nation of Switzerland holds 1,040 tonnes of gold, accounting for 7.5% of its foreign reserves. Russia has been adding vehemently to its gold reserves in recent years, coming in at 1,149.80 tonnes representing 9.9% of the country’s foreign reserves. Now to some big numbers. France currently holds 2,435.4 tonnes of gold, representing roughly 65.3% of its total foreign reserves. Germany hold even more at 67.0% of total foreign reserves or 3,384.2 tonnes of gold. And last but not least, you have the United States, which holds the world’s largest supply of gold at 8,133.5 tonnes, representing approximately72% of its foreign reserves.
All of the above stats were taken from a February 4th article titled Top 10 Countries with the Highest Gold Reserves.
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Canada opts for SDR Reserves not Gold
While Canada is offing its gold holdings, the country’s official international reserves increased by an amount equivalent to US$1,429 million during January to US$81,182 million.
source: http://www.fin.gc.ca/n16/16-019-eng.asp
Canada’s overall foreign reserves are rising, but some would argue, gold holdings are the most important in today’s ZIRP money printing experiment.
Special drawing rights or SDRs increased to US $7,869 million while Canada’s reserve position in the IMF increased to US $2,709 million, on February 3rd according to the Department of Finance.
What are SDRs? The international currency was created in the context of the Bretton Woods fixed exchange rate system and designed to function as a supplementary international reserve asset. Best-selling author Jim Rickards has argued the role of SDRs will become increasing important when the US Dollar comes under pressure in the years ahead.
The IMF provides a definition on its website:
“The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is currently based on a basket of four major currencies, and the basket will be expanded to include the Chinese Renminbi (RMB) as the fifth currency, effective October 1, 2016. SDRs can be exchanged for freely usable currencies. As of November 30, 2015, 204.1 billion SDRs had been created and allocated to members (equivalent to about $285 billion).”
source: http://www.imf.org/external/np/exr/facts/sdr.htm
Gold was down Friday after its best day in seven years Thursday which saw the metal rise more than $50 an ounce. Gold stocks were little changed Friday as the Market Vectors® Junior Gold Miners ETF (GDXJ) traded down slightly, just 0.25% to $23.95. Canada’s one saving grace in all of this, is that as a country, Canada has more gold in the ground than most. Still, getting that gold out of the ground and using it to back a currency in short order is not easily accomplished. Nevertheless, Canada will have a chance to redeem itself if gold emerges as the currency of last resort as we approach the climax of the Global Currency War.
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