Canada to stem gold sales from its Central Bank

The Canadian government’s policy of having the central bank of Canada sell off its gold reserves will be wound down, according to Finance Minister Paul Martin.

“We have come to pretty near the end of that process,” he told reporters after a speech sponsored by the Association of Canadian Investment Dealers in London, England. “While there may well be other sales, (they’ll be) nothing like what we saw before.”

The policy of selling off gold reserves has been strongly criticised by Canadian gold producers. The main reason is that large gold sales, particularly those by Canada’s central bank, have lowered the gold price. This negative price effect can be further aggravated if other governments sell off reserves through their central banks.

According to George Miller, president of the Mining Association of Canada, the Canadian government “within the last three years … has sold up to 4 million ounces a year, or an amount almost equal to the total yearly gold production in Canada. This has had a severe impact on the price of gold and we have expressed our concerns to the government.”

Miller said he’s pleased the government has taken steps to decrease gold sales.

A report titled “The Gold Market” by investment firm T. Hoare & Co. reveals just how significant the government’s gold sales have been.

“Over the past eight years, without the unusual sales from Belgium and the Netherlands plus Canada, the (gold) market was approximately in balance,” the report notes.

“National (central bank) holdings, reported to the International Monetary Fund (IMF) in November, 1993 (the latest month for which full figures are available), stood at 914.6 million ounces; in 1986, they amounted to 951.6 million ounces. If the holdings of the IMF, the EMCF and the BIS are included, then the respective totals are 1,115 million ounces (November, 1993) and 1,148 million ounces (1986). Thus, over eight years, the official sector (central banks) has released 33 million ounces into the market, of which 13.7 million ounces or 42% has come from Canada.”

Over the past eight years the Canadian government’s reserves have dropped to just under 6 million oz. from nearly 20 million oz.