Friday, February 12, 2016

Canadian Gold and Brown's Bottom

Most everyone in the gold circuit by now has heard of the infamous gold sale by Gordon Brown of England's gold at the very start of the massive gold bull market we find ourselves embedded in (I know it doesn't feel like it).

Google "Brown's Bottom" and you will get 14.4 million hits! Rather than getting his 15 minutes of fame, Brown secured for himself 15+ years of infamy. The clock is still and will keep running.

Now we see that news has surfaced recently that Finance Minister Bill Morneau of Canada has decided the best course of action for Canada's gold is to be sold.

That they are doing this is not news in and of itself. Canada has slowly been divesting themselves of gold for years since Nixon closed the gold window. What's interesting is why discuss it now? 

The article I'm referring to, first found at GATA's website, was sourced at Global News, link here.

In the article one Ian Lee of the Sprott School of Business at Carleton University makes some pretty incredible statements.

Calling Canada's gold sale, "wise and astute", Lees says, "It gives them more strategic flexibility to sell the gold, take the money and invest in U.S. government bonds, or United Kingdom bonds or French bonds or German bonds,”.

He goes on to say, "Central banks can hold the government bonds of other countries, and they also hold actual dollars. The Chinese Central Bank actually holds hundreds of billions of U.S. dollars. Dollars are very liquid, so are government bonds, especially of a Western country.”

We will see how "wise and astute" this sale turns out to be. Not all central banks agree that gold has no place in today's current financial environment.

But to be clear, this is not the decision of Canada's central bank. They make that clear. The Bank of Canada says this, "Canada’s gold reserves belong to the Government of Canada, and are held under the name of the Minister of Finance,” explained a spokesperson for the Bank of Canada on Wednesday. “Decisions relative to gold holdings are taken by the Minister of Finance."

Now I consider THAT wise and astute; separating themselves from this decision and putting it squarely on the Finance Minister, Bill Morneau. 

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