Newspaper article The Canadian Press

Gold Dust: Canada's Sell-Off of Precious Metal Marks End of an Era

Newspaper article The Canadian Press

Gold Dust: Canada's Sell-Off of Precious Metal Marks End of an Era

Article excerpt

Canada's gold sell-off end of an era

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CALGARY - Canada may be a global outlier when it comes to its sell-off of gold.

But to Ian Lee, a professor at Carleton University's Sprott School of Business, the decision marks the end of an era that doesn't fit into today's financial system.

"Why did they sell the gold? To convert it into cash, which is liquid," said Lee. "Bullion is not liquid. It sits down in the basement and collects dust."

The country's holdings in the precious metal peaked in 1965 at 1,023 tonnes or about 32.9 million ounces, according to the World Gold Council. But in recent years, gold has lost its lustre for the federal government, which on Thursday announced it was left with 77 ounces in official reserves -- less than a quarter the size of a gold bar.

Lee said countries previously measured their wealth by the amount of gold they had, and currencies were fixed to the price of gold. Those days are long gone.

Today the world relies on much more efficient floating exchange rates to balance the value of currencies, and wealth is measured in productivity, said Lee.

"The idea that that's the productive wealth of Canada, in the number of yellow bricks it owns, is just so preposterous."

With the United States abandoning the gold standard in 1933 and then fully severing ties between the dollar and gold in 1971, Lee says bullion no longer holds sway on global finances.

"That was it for gold," said Lee. "From that point on, gold became a member of an asset class, a heavily traded asset class, but it was no longer an instrument of monetary policy."

But those reasons haven't stopped governments around the world from holding vast quantities of gold, with the U.S. currently sitting on 261.5 million ounces, Germany with 108.7 million ounces, and China, Russia and India all actively adding to their already tens of millions of ounces in holdings. …

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