News about Gold and our distant cousin Canada caught my eye this week, along with a few other Gold and Silver commentators. One of my favourites, Mike Maloney expressed it this way in a short news video feature this week:
“A couple of things I find extremely odd. Canada have sold their Gold reserves. I’ve spoken in Canada several times and I tell the audience, “Your currency is backed by the U.S. dollar, which is backed by a broken promise.” The U.S. dollar is now backed solely by the promise to tax our citizens in the future and the Canadian dollar is backed by U.S. Treasuries and Canadian Treasuries. So, it’s the same thing – fiat currencies – which are soon to be doomed, pretty much. What I find interesting is they just sold off almost all of their gold, they have 77 ounces left! That’s all that the entire government of Canada have! My question is, “Why would any country sell gold when the buyers are China and Russia? China, Russia, India and Turkey buy more Gold than the entire world production for the past three years. They’re buying more gold and stocking it away than all the gold that is mined each year on the planet and this is where the excess is coming from; from governments that are doing stupid things like this.” (Mike Maloney, 00:00 to 01:56 minutes of GoldSilver.com video, March 2016)
It is fair to deduct, therefore, that many private investors of Gold and Silver in the U.K. therefore now personally own more Physical Gold than the Government of Canada!! We hope you are one of them!
(We wonder what ever happened to this Canadian one million dollar gold coin!)
And here is this news from a slightly different angle and including Silver: “There’s gold and silver on sale on the Toronto stock market, courtesy of an unusual source: the government of Canada. The Royal Canadian Mint has issued two exchange-traded receipts, one representing a weight of gold, the other a weight of silver, that are currently trading for less than the market value of the precious metals they represent. The discount is modest. Still, it is uncommon to find securities exchangeable for precious metals worth less than their current metal prices, especially when the securities are backed by the mint, which is backed by the full faith and credit of the triple-A-rated federal government. “We’re trading at a bit of a discount. We aren’t exactly sure why,” comments Steve Higgins, senior manager of investor relations at the mint.” (The Globe and Mail).
But, wait a minute, what really amazes me about this story is not just that Canada have sold all their Gold but that they have done this before! You see, the above extract from The Globe and Mail is one I found from… May 2013! And yet, Mike Maloney made his video about the exact same move this last week!
That one large Western economy would sell all its Gold reserve is so puzzling. Here is a short video of another very respected Gold and Silver commentator, Eric Sprott, himself a Canadian, concluding that: “I take a pretty broad view of Gold and the market has already made Gold the reserve currency; the market has, not the central banks. Ultimately I think these currencies are going to have to be backed by something tangible, which really means Gold and Silver. And the fact that we [Canada] don’t have any Gold puts us in a weakened position. I think it would be important for us to re-establish those reserves. People will have noticed that a lot of central banks are buying Gold now.”
He continues, “Europe’s banking system is worse off than any one is prepared to admit. There’s only one reason (European) banks have to borrow from the European Central Bank and that’s because deposits are leaving and they either can’t sell an asset, which they probably can’t, so they have to go to the Central Bank to pay off the depositor. “Canada’s Gold Reserve Problem. It Has Gone.” (4 minute video below)
But here’s the even more puzzling fact. This Sprott video was made in 2011! So, what is going on? Why does the Canadian government keep selling its Gold reserves? At first I wondered if they were selling paper assets only and then buying up the Physical. But in the 2013 sale, as least, it looks like the paper is backed by allocated physical for investors:
“The discount is particularly unusual considering investors holding enough of the receipts can take them to the mint and redeem them for gold coins or bars held in the Crown corporation’s fortress-like vault near the Parliament buildings. Ever helpful in this department, the mint publishes a list of armoured car companies that can be dispatched to haul away the lucre. To date, though, only two giant 400-ounce gold bars worth about $560,000 (U.S.) each have been picked up. “We don’t like people pulling up with their pickup trucks or anything along those lines” for security reasons, Mr. Higgins explains.” (On Sale Now: Canada’s Gold Reserve.)
But, when I look closer, the rational for selling the Gold is shocking, but not unusual. “The discount has arisen as investors dumped the securities following the swoon in precious metals prices in February and April , and is a sign of how disenchanted markets are toward the one-time havens.” (The Globe and Mail, 2011) Did you hear that? Who would ever call Gold and Silver “one time” safe havens, when historical and economic facts show that Gold and Silver are where people run every single time a fiat currency is in danger of collapse? That’s like saying, “The English Channel is a one-time body of water.” No, it’s always there. From the Spanish Armada through the Second World War to the present day, it continues to be a key body of protective water. Just the same in the economic dynamic, Gold and Silver continue to be a key metal of protective value. A government which sells all its Gold reserves amidst an approaching invasion of currency collapse just doesn’t make sense. And that’s why it keeps making the news.
Did the British government ever do anything so illogical in appearance? Most of our readers know the answer to that, as I’ve had the pleasure of talking to many of our very well-informed customers over the phone since 2011. Let’s hope George Osborne doesn’t follow Canada’s (and Gordon Brown’s) puzzling move of selling much of Britain’s gold reserves. But, at least our readers and the British public can continue to buy physical Gold and Silver bars and coins, regardless of current government fiscal decisions. And today is a particularly important day: Budget Day.
This is how Sky News built up the reporting on Monday, looking forward toward Budget Day: “Because of tumbling share prices and poor wage growth the amount of money coming in from taxes might go down, which leaves [George Osborne] with a black hole in his books. He might have to break his own rules or he might have to put up taxes or cut spending. We’ll find out when he announces the budget.” (Sky News, 14 March 2016, “George Osborne may have less money available than previously thought.”)
This is like saying, “The curtains caused the fire that burned down the house!” without mentioning that burning hot coals from an overloaded open fire actually rolled across the floor first! Yes, we have falling tax revenues and poor wage growth, (the metaphorical curtains) but the overloading of the pound with fake money (quantitative easing) over the last eight years is what’s caused the pound to devalue and for us to find ourselves in our current mess. Rather than stimulate the economy, too much fake money eventually caught the curtains on fire.
“There is a near one in three chance the world economy will slip back in to recession this year as low oil prices and extraordinary monetary stimulus have a dwindling impact on global growth, Morgan Stanley warned, only two days ago. (Global Recession Risks Rise to 30%, Telegraph Business, 14th March 2016)
Quantitative easing, and high debt to GDP always, in the long run, result in tumbling share prices and poor wage growth. To blame those latter things, instead of the former things, is to blame the result, not the cause. So, I don’t think anyone in the know would have previously thought more money would become available, unless they believed that quantitative easing would actually work in the long run and now they’re a bit surprised that it hasn’t! But, rather than blame the loose fiscal policy of the governments around the world since 2008, and their flooding of the markets with “printed” money to try to stimulate the economy, it is easier to white wash that and blame the inflammable curtains of poor tax revenue.
The BBC announced this morning that, “Mr Osborne will deliver his Budget at 12:30 GMT, after Prime Minister’s Questions, setting out the latest economic forecasts and the state of the public finances. George Osborne will set out £4bn in extra spending cuts and announce investment in the UK’s infrastructure when he presents his Budget to MPs. The Budget will “choose the long term” the chancellor will say, warning that the “storm clouds are gathering again”. Hang on a minute! Was George Osborne inspired by my last week’s blog of the same title?!! “A Storm is Coming; The Real Figures of Gold and Silver Demand.” Joking aside, what I find wonderful is that where there are incomprehensible decisions by governments at times, there then arise outstanding ideas from the free market. Just as I quoted from Eric Sprott earlier, “the market has already made Gold the reserve currency; the market has, not the central banks.”
Look at this ingenuous new company set up in Canada, in direct response to market needs in the wake of its government selling its Gold reserves:
“Thanks to Toronto-based startup BitGold, an increasing amount of Canadian travellers are investing in Gold in order to hold savings and make payments overseas. Whether it’s an exotic trip to taste the wonders of Italy, or a long weekend excursion south of the border, travel has become increasingly expensive for Canadians thanks to our weakened dollar. Not only do we lose money when converting our currency into U.S. dollars or Euros, but the fees to convert that cash and access our funds when overseas can quickly add up. Wouldn’t it be so much easier if we could just use gold coins to dodge foreign exchange rates, like the good old days?” (Global News, Could using gold as cash help save you from costly currency conversions on your next trip? 15 March 2016)
There’s that historical reference again to Gold being real money!!
This is the most obvious new move into using Gold exactly as history designed it – as real money and the only real world reserve currency – that I have seen in recent months. It’s grass roots and in direct response to the opposing, odd view that Gold and Silver are just “one off” safe havens. This Canadian company’s business strap line is this: “Gold Bullion is the World’s Oldest Asset Class and the Century’s Best Performing Currency.” If I could add in Silver, I would agree 100% with that statement. That is because ancient Greece used Silver as currency plus the word for “Silver” and “Money” is the same in at least one ancient Classical Language of which I know.
How this new – but centuries old – market development of using Gold as Canadian money works is exactly as would work a gold backed new world reserve currency in the future. You even get a Gold Backed MasterCard to use in the shops! “BitGold (which is in no way related to the virtual currency “bitcoin”) allows users to buy physical gold, which is stored at private vaults secured by Brinks around the world. Once you have purchased gold using the platform, you can store it as an investment or you can redeem your gold for US Dollars, British Pound, or Euros using the company’s prepaid “GoldMoney” MasterCard. The idea is that you would sell your physical gold in whatever currency you wish to spend in without losing money on the conversion.
“Gold transcends borders because it’s universal,” said BitGold CEO Darrell MacMullin. “It’s the only global currency.”
I literally couldn’t express this better myself. On the one hand, it’s genius but not innovative, in that it’s reverting to the historically tested “Good money” of Physical Gold. But, on the other hand, it is making Gold digital which is a little disconcerting in that I believe there is nothing, nothing like having the Physical Bullion in your name and in the location of your choice. Having said that, I have included this incredible leap forward in market innovation to show that we are, I believe, increasingly close to a Gold Backed world currency. Lack of consumer faith in a paper currency does that. So, a Gold Backed Canadian currency is happening today! I wonder which country will follow suit next? Russia, China, Turkey and India will be pleased.
So, in many ways, we know what the British Budget will look like already. We know the state of our economy. We know our debt to GDP ratio. We know the growing affects of too much quantitative easing. We know the dangers of the sinking EuroZone economy. The real question is how are you and I preparing for what follows?
We offer a variety of Gold and Silver investment bars and coins at competitive prices with professional and personal customer service. Call us to move your money out of the fiat system and into your own Physical Gold and Silver now! Don’t get caught with your money locked in the bank or property as things unravel! Caroline Peers, Bleyer’s C.E.O. explains, “The first step is to pick up the phone to one of the team. We’ve built a small, approachable team who know a great deal about what is feeding this price rise and what the different products can offer. Some bullion coins for example, are Capital Gains Tax free while Gold bullion is V.A.T. free. So it’s worth talking with us before you buy. A troy ounce Gold bar or coin can cost from around £909 with Bleyer offering a variety of sizes and prices. Silver has historically sat at about 16th of Gold’s value. At present silver is about 1/80th the price of Gold which is seen as “a buying opportunity. (I hope to write about this opportunity in the Physical silver market soon as this ratio is almost at the 5 year high of 1/83rd.)
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Whether you are an I.F.A., or a member of the public new to the Physical Gold and Silver market, contact Bleyer to find out more. Call on 01769 618618 or email email@example.com We hope you have a good week and that there are no unpleasant surprises in this afternoon’s Budget.