As gold sees substantial, sustained gains, it might be surprising to hear that one of the world’s most stable economies is liquidating their gold reserves.
Canada is a net gold exporter, and once had substantial gold reserves, a segment which has seen a steady decline in it’s overall share in the nation’s total reserve equity. At the height of the cold war, in 1965, the large but sparsely populated nation had over 1 000 tonnes of the yellow metal backing their currency – this fell by over 30% in the following 5 years, and by 1995, only a little over 10% of peak totals remained.
The precipitous fall in the role of gold in Canada’s economic backing is part of a global trend in national economic planning – from the UK leaving the gold standard back in ’31 to the US following suit 4 decades later. FIAT currencies and diversified government holdings have brought unprecedented growth and opportunity through the course of the past 60 years. The dark side of this, of course are the inherent instability and institutional distrust which result from a system entirely dictated by the whims of market agents which most people see as being motivated exclusively by greed.
The point of this piece is not to comment on the merits of FIAT currencies (the weight of a now enormous historical data set speaks for itself) or the greed of market agents (the virtual daily reports of banking scandals more than speak to that), rather we confine ourselves here merely to the apparent paradox of phasing out a performing asset.
With most analysts agreed that the gold bear was going to soon have to face the bull, the Canadian Government more than halved their holdings at the end of last year to a paltry 0.62 tonnes. This of course, was just before the New Year’s market chaos and ‘safe havens’ upswing. The complete lack of market timing has been blamed on the fact that the latest round of “sales […] being conducted over a long period and in a controlled manner” and without any eye to “a specific gold price.”
Though it might make sense for national reserves to be more dynamic than they have in past, this does not mean that they should abandon common sense – rather than being mired in bureaucracy, governmental institutions should keep an eye to profitability. I suppose that the latest round of selling is simply yet another case of wasted opportunity.
skarbnicazlota 