The Trudeau government’s decision to sell off nearly all of Canada’s gold reserves in 2016 has come at a heavy price for the country’s coffers. As seen from the analysis of SmallCapSteve, the decision has cost Canadians over $135 million, as gold prices have more than doubled since the sales took place.
In 2016, Canada reduced its gold holdings to just 77 ounces, down from a peak of over 1,000 tonnes in the 1960’s. Over a three-month period from December 2015 to February 2016, the government sold off a total of 95,817 ounces of gold at an average price of US$1,274.70 per ounce, generating approximately US$122 million in revenue.
However, the true cost of this decision has become apparent as gold prices have soared, reaching US$2,405 per ounce as of today. If Canada had held onto its gold reserves and sold them at the current market rate, the country would have generated approximately US$230 million, representing an opportunity cost of over US$108 million, or approximately $149 million in Canadian dollars.
The government’s rationale for the gold sale was to diversify its financial assets, moving away from physical commodities and towards more liquid financial instruments. While the government maintains that the decision was not tied to a specific gold price, the figures highlight a significant potential loss in revenue for the country.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
One Response
That last 95,000 oz was pocket change (literally, just coin, odd stuff, and scrap). There was 2.3 Million oz in the ’80s (about $US6 Billion at today’s prices) and it got flogged off and traded for paper under both Conservative and Liberal governments. The major selloff was between ’87 and ’95, some 525 tons, or 1.6 Million oz at an average of about $US400 or so.
That was considered the thing to do in many Western countries during that era.