Most of us are aware of mistakes made by our federal government. However, few recognize the outrageous waste and missteps of Ottawa over the last several decades, namely that Canada has sold all of the nation’s gold reserves.
Therefore, a fortune has vanished, equal to about eight per cent of our national debt.
For more than a generation, Canada has been selling off its entire gold holdings. In 1968, 10 million ounces were sold at $35 per ounce, as part of the gold pool to keep down the price of gold.
The remainder of our gold holdings were auctioned off at a small fraction of the current price. The result is that unlike any but the smallest countries, our nation has absolutely no gold. That has been a colossal, costly error.
Canada has disposed of its gold reserves, probably in part at the behest of the United States, which, incidentally, has sold none of its gold reserves, which are the largest of any nation. The U.S. urged us, and others, too, to dispose of gold holdings and place the proceeds in U. S. bonds. If we had a strong, resolute (and independent) leadership in Ottawa, we very well may have taken a different action. Can one imagine Prime Minister Sir John A. Macdonald or Prime Minister John Diefenbaker acceding to any such request?
It should be noted that we have lost more than $30-billion by selling all our gold and placing the proceeds in U.S. Treasury bonds.
That total includes the revenue that could have been earned on the bonds as replacements, and the loss in exchange value foregone.
Now Canada should take steps to replace as much of our gold reserves as we can.
Under the Emergency Gold Mining Act that came into force in 1948, Ottawa provided financial assistance to our gold mines.
We should enact similar legislation to ensure that Canada can benefit from the pending rise that seems destined to take place over the next few years, a tripling, quadrupling, or more in price that will occur.
Why will gold’s price soar in the next few years?
There are many reasons for that.
The financial deterioration in the United States, its huge foreign trade and budget deficits coupled with unsustainable consumer debt loads, will entail a flight to gold as a bulwark against acute financial problems there. There now is underway global currency debasement as every nation wants to counteract the business and trade imbalances. As a consequence, investment demand will continue to accelerate.
To combat the economic recession, U.S. interest rates are held at inappropriately low levels. That plus money printing will weaken faith in paper currencies.
Also, the financial community has used devices such as derivatives and collateral debt swaps that in the words of Warren Buffet, are "weapons of mass financial destruction".
In addition, there is a very large gap between supply and demand for gold. Gold mining production has been in a downtrend for years.
This almost inevitably should mean higher gold prices, and Canada should be in a position to capitalize on that.