Mar 072016
 

Canada Says Farewell to Gold

One upon a time most currencies were backed by gold. But in 1971 president Richard Nixon took the U.S. off the gold standard switching to a floating currency instead so its Central Bank can exert more influence over the currency, and other countries followed suit. Today, everyone uses fiat currency and gold is no longer relevant on the world’s financial stage.

Canada use to have more than 1,000 tons of gold in the 1960’s as part of our foreign exchange reserves. But Ottawa has long forsaken the notion that gold can be a useful diversification tool for a country’s monetary interest. For decades Canada has been slowly selling off its gold reserves, and according to the Finance Department, it only has 77 ounces of gold coins remaining today, which is worth about US $100,000. That’s nothing more than a rounding error compared to the US $80,000,000,000 of total foreign exchange reserves we have.

As Canada gets out of the gold game, others are buying more. According to the World Gold Council, central banks around the world added a net of 336 tons to their reserves in the second half of 2015, representing a 25% increase from the previous year. Russia and India have increased their holdings. And since the start of this century China has bolstered its gold reserves by 350% from 400 tons in 2000 to nearly 1,800 tons today. Even individual investors have helped take gold off the Bank of Canada’s hands. A couple years ago I blogged about buying a 1 ounce limited edition gold coin for CAD $1,389. It’s easily worth 20% more today given the current spot price of gold. 🙂

Here’s a look at the biggest holders of gold by country. (source)

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Based on the chart above, we can see that the U.S. central bank holds the most gold by a wide margin. The 8,133 tons of gold held by the U.S. make up 72% of its foreign exchange reserves. The next 3 countries in the list, Germany, Italy, and France also holds more than half of their reserves in gold.

It’s interesting how other central banks seem to be holding or even increasing their gold reserves while Canada has done the exact opposite, lol. I’ll write about the possible reasoning behind these two diverging ideologies around gold in a future post, but it has to do with the nature and purpose of Foreign Exchange Reserves, which requires a rather lengthy explanation.

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Oct 222015
 

Purchasing a 100 Oz Silver Bullion

Gold and silver may not be good investments, but I consider them to be a form of currency because they store financial value that can be easily exchanged for goods, services, or other currencies relatively quickly. 🙂

The idea of sitting on cash to stay safe and secure sounds innocent enough. But that’s only if we isolate the discussion to one domestic country. Today the world economy is more connected than ever before. Due to low commodity prices Canada’s economy isn’t as productive as it once was. This drives down the price of our currency because global investors are less confident in our productivity. Over the last year the Loonie has lost 20% of its value relative to the $US.

This affects Canadian’s ability to trade with other countries because it makes importing goods like fruits and gasoline from the U.S. more expensive. 🙁 However, those who held some silver as a substitute for the Canadian currency during this time would have kept most of their purchasing power. That’s because the price of silver has increased 13% over the past 12 months when priced against the Canadian dollar. 😉

So earlier this week on Tuesday I went out to my local bullion dealer and bought a 100 ounce silver bar for $2,241 CAD. The shape reminds me of an iPhone 6 Plus, except the silver is almost 3 times thicker measuring 2 cm (3/4 inch) thick. And it weighs about 3.11 Kg (6.86 lb,) which is literally 18 times the weight of an iPhone 6 plus, lol. Who needs the gym when you can workout at home with silver? 😛

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This highly purified block of silver was produced by the Royal Canadian Mint. The front of the silver bar shows the RCM signature stamp and the year it was produced (2011,) along with a serial number. The bar is also engraved with the weight of silver in it, and the purity of the metal. 🙂 RCM is known for its quality and its brand is recognized worldwide. There is some clear scratching and general wear on the bullion, but nothing too noticeable. Overall I give this purchase 8/10. 🙂 Great product. A+ experience. Would buy again! After taking some pictures I’ve stored the bullion in my safety deposit box at my bank. I don’t plan to sell it until I retire, or run into some kind of emergency.

Last year I blogged some step by step instructions on how to convert one’s wages into physical silver. This 100 oz bar I purchased represents about 4% of my income for this year. So instead of making 100% of my money in Canadian dollars I’ve essentially divested 4% of cash earnings into precious metals. I’ve also converted about 16% of my income this year into U.S. dollars and bought U.S. stocks. 😀 Diversification isn’t only about asset allocation. It’s about a holistic financial perspective, including currency considerations. 😉

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Mar 242014
 

In ancient Rome, the Denarius currency started out as a 4.5 gram coin made of almost pure silver. But over time the amount of silver content in the coin was reduced to just 2%. The Denarius had become almost worthless thanks to inflation and had to be replaced by a new currency, the Argenteus.

In the 17th century the colonial currency suffered the same fate. The famous English economist Adam Smith criticized colonial currency in his work, The Wealth of Nations. The inflationary nature of the currency, he wrote, was a “violent injustice” to the creditor; “a scheme of fraudulent debtors to cheat their creditors.” A creditor is someone who lends money to someone else. In 1775, the colonial pounds were replaced by a Continental currency, which of course also failed.

In 1794 the first American dollar was minted 🙂 These were made from almost pure silver. But they are no longer produced today. And starting in 1965 American quarters were minted with a combination of copper and nickel, which replaced the original silver content.

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Oct 102013
 

The U.S. government is nearing its maximum borrowing capacity. If Congress can’t agree on a budget soon they won’t be able to raise the debt ceiling which could mean disaster for the economy. I don’t think anyone is expecting the US to default, but there will probably be a lot of uncertainty in the next week.

But one thing we can do in the meantime to protect ourselves against the risk of hitting the debt ceiling is to buy some insurance. So earlier today I went out and bought an ounce of gold for $1,400, and a 10 ounce bar of silver for $250. My purchase was from the VBCE in downtown Vancouver. They are a walk-in bullion and currency exchange business. They accept cash or debt card. You don’t need to show I.D. unless you’re buying a lot of gold/silver.

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I chose to buy gold because in uncertain times, gold usually does well. It’s currently trading at around $1,300/oz USD. I don’t think there’s much room for it to drop from here. This is my reasoning. First, we know that gold has been a store of value for thousands of years and that’s probably not going to change in our lifetime. So if gold can never drop to $0 then what is the lowest it can go? To tackle this question, have a look at this excerpt from a Globe and Mail article published a couple of months ago.

“Many major gold miners have since started reporting what they call their ‘all-in’ cost of production.
Last quarter, Barrick’s amounted to $919 an ounce, while Kinross’s totalled $1,072 an ounce
and Goldcorp Inc.’s hit $1,279 an ounce. …Big names like Barrick and Australia’s Newcrest Mining Ltd.
have embarked on campaigns to either sell
or scale back their highest cost development and exploration projects.”

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Apr 232013
 

The Arctic Landscape Silver Coin

Earlier this month I purchased the Canada’s Arctic Landscape 2013 Fine Silver coin. It’s a 1 kilogram (2.2lb) 99.99% silver coin made by the Royal Canadian Mint. It can be bought either on the mint.ca directly, or through one of their third party vendors world wide. Either way, you can expect to pay $2,249.95 CAD.  (^_-) I didn’t have any savings, so I borrowed the money from my line of credit. :0) The coin comes with a custom maple wood box lined with flock, and fits in a black cardboard sleeve to protect the box.

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PRESENTATION

The coin itself, which is inclosed in a transparent plastic case, can be set comfortably inside the linings of the wooden box so they can be displayed together. The craftsmanship on the box is top notch and compliments the coin well.

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DESIGN

The image on the Arctic Landscape coin was designed by Canadian artist W. David Ward. The image represents a highly detailed rendition of the Baffin Island at the mouth of the Northwest Passage. On the obverse side of the coin is a portrait of Queen Elizabeth II designed by Susanna Blunt. At 4 inches wide in diameter the coin looks somewhat smaller than a DVD which is 4.7 inches wide. The coin is roughly half an inch thick. Weighing in at exactly 1,000 grams or roughly 32 troy ounces, it’s aboot 32 times the size and weight of the various 1 oz silver coins that are common in circulation.

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VALUE

Based on current commodity pricing 1 kg of silver should cost no more than $1,000. But the price for this coin is $2,250. Why the premium? Unlike bullion, these rare, authentic, un-circulated coins are specially commissioned, proof finished and have a limited mintage. But is all that worth the extra cost over the spot price of silver? I certainly think so. 🙂 Proofs are minted with special dies that have been chemically treated with acid. Furthermore each coin is struck multiple times to force the silver into all the crevices of the die giving the coin more definition and fidelity. 13_04_arcticsilver4 silver coin review

The result is a gorgeous coin that has a very distinct look and feel that can’t be replicated with normal minting practices. For example, when viewed from certain angles the design appears clean, flat, and almost cell shaded like a painting (see image below.) But when viewed from other angles the contrast of the image becomes more dynamic. The water and sky darkens in contrast to the glacier in the foreground, and the surface feels more 3 dimensional. It’s almost like magic. (゜o゜)  (mouse over image below to see the change.) Furthermore, the light reflecting off this coin appears to have a higher range than what most digital displays can output. Pictures like the ones in this post cannot accurately depict its true beauty. The only way to appreciate a proof coin properly is to see it in person. 😉

Only 750 of these Arctic Landscape coins were minted. So today only 1 in roughly 9.3 million people in the world can own this coin. It will become 1 in every 10 million in the future as the population grows making the coin even more rare. From the ingenuity used to craft this coin to the sheer beauty of its design this is truly a work of art.

VERDICT

This beautifully crafted fine silver coin captures the history, heritage, and magnificence of the Arctic landscape. It’s a symbol of Canadian engineering and artistic talent working together to create something truly brilliant. It’s almost like this coin was just mint to be. 😀 The rare mintage (only 750,) and the globally recognized RCM brand make this coin a must have for any collector or enthusiast. I give this coin a perfect 5 out of 5. Delivered as advertised. A+++ product. Great seller. Would buy from again!