Canada sells half of its Gold Reserves

[KDave]

There have been a few articles this week about Canada selling half of its gold reserves in the last 2 months, apparently with the intention of reallocating into a mixture of foreign government bonds. The decision to sell came from the finance minister....

When a government starts selling its gold reverses that is a good sign of the bottom if there ever was one! It seems reckless to move away from gold in today's environment, especially when the initial holding was so small by comparison to other countries. I can't understand the mindset behind this decision.

What are peoples thoughts on this?

Edit - Apparently its worse than half, it has sold almost all of its gold reserves with only 0.68 tonnes left.

[Roy]

Crikey! Even Mr-Dead holds more than that! 

[HawkHybrid]

uk selling much of it's gold reserves comes to mind.

I wonder who's doing the buying?

 

HH

[Dune69]

You think it will impact the gold maple production if future years?

[Stu]

Maybe for a quick take with their eyes on their gold mining sector when it goes t***s up.Canada digs out around 150 t of gold a year. 

[HelpingHands]

It might look like a good time through their eyes if you look at gold in CAD.

[HelpingHands]

But then again, that logic goes out of the window when you assume Russia are buying at not selling.

Gold in Rubles.

 

 

[mr-dead]

http://globalnews.ca/news/2508940/canada-sells-nearly-half-of-all-its-gold-reserves/

[sovereignsteve]

I wouldn't take much notice of what any finance minister or head of central bank does in this respect. They always get it wrong anyway!

[JB3]

It's probably an 'existentialist' thing about whether 'value' - to back the promises of the government - is better done with gold or a 'mutuality' of other government's promises.

 

I can see the merits of each, although clearly I prefer gold. Gold, to me, is more likely to 'survive' a major failure of governmental debt. So, this is better for my personal financial benefit.

Governments themselves thoughn don't need anything that will survive longer than they do. So the failure of international, high-quality government bonds to withstand a fiat crisis is irrelevant really - the government itself will be falling at the same time. It has no need to buy better insurance to last longer than it will.

[Vulture]

It would seem to be a little odd that such a small amount of gold would be sold by Canada. Maybe they should have checked down the back of the sofa cushions first.

I will quote you from an article dated January 2014 that seems to have disappeared as I was trying to link to the pdf article.

It is in regard to the UK selling the large tonnage of gold.

 

BUT several years later a conversation surfaced that had involved Bank of England Governor Eddie George, shortly after the Washington agreement was signed in 1999. Whereupon many of the doubts surrounding the motives behind the strange doings in the gold markets disappeared like my buddy Whipper West 20 seconds before the bar tab is presented:

(Jesse's Café Américain): In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said "We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.

[JB3]

9 hours ago, Vulture said:

 

It would seem to be a little odd that such a small amount of gold would be sold by Canada. Maybe they should have checked down the back of the sofa cushions first.

 

 

That's why I don't think this is a manouvre to suppress the gold price - beyond the gesture and statement of 'non-interest' in holding gold, it isn't big enough to quell prices. I suspect they see this as a way to convert non-interest-bearing gold in a secular downturn into (albeit minimally-) interest-bearing debt at a time when they see gold as relatively overvalued in CAD.

 

Not saying I agree that's a good move - but what do I know about their finances? I'm hardly a millionaire myself! - it's just what I'd make of their switch to international governmental debt.

[motorbikez]

It's not much of a story IMHO & is a totally insignificant amount of gold sold in the realm of things. Canada has huge commodity resources in the ground & is a significant gold producer. If their government so desired it could easily build up a substantial gold reserve again or milk the mining co's by imposing some sort of tax if gold rose substantially.

[Scuzzle]

From what I hear Canada need to do something about having a plan B, to me it looks like they are currently in a lose / lose situation by just holding US Dollars in their treasury reserves.  The US dollar strengthens the Canadian Loony weakens, the US Dollar weakens their reserves weaken along with it so they are hardly in an ideal situation.

[Bumble]

Canada had already sold nearly all of its gold back in the 1990s. It was a decision based on the then current doctrine that gold reserves were no longer needed by countries as long as they held plenty of US dollars. Gordon Brown sold half of the UK's gold then too. So the "half" sold by Canada just recently is merely what they found down the back of the sofa.

Canada does of course have lots of gold in the ground, but it would be a drastic step to nationalise all the miners. Though if the price of gold were to soar, I could well imagine some kind of additional tax being introduced.

[Pete]

People in Finance that deal with money, that is not theirs, can make crazy decisions for short term gains or fancy technical accounting.
Seems a bad time to be unloading gold as all indicators point to having hit bottom and becoming bullish.

In my last job a finance director sold our privately owned offices to a property company that then rented back to us.
The fast buck added to the balance sheet looked good ( for Mr. Finance Director naturally ) but after 5 years of paying rent the property company had got all its money back, had a building that was appreciating in value and we were stuck with high rents for ever.

 

[tepid]

Governments, politicians, and central banks tend to do worse than coin-flips when it comes to shrewd financial decisions.

[mr-dead]

I now officially have a greater gold reserve than the country of Canda

Yep, they have gone and sold the last bit they owned.

 

[Shinus73]

I just have to find somewhere to put it all now....

[BaldyBob]

I suppose have the fallback option of controlling their own gold deposits. They must be in the top 10 producers.