Central banks around the world bought 651 tonnes of gold in 2019. That's an astonishing thing for a myriad of reasons beyond just the staggering amount. Here's how much gold that is pictures.
Gold is enjoying a bull market in recent years but who and what is driving the price?
In March of 2019 the Bank of International Settlements(BIS) in Basel Switzerland re-classified gold from a tier 3 class of assets to a tier 1 asset. Tier 1 is the same as cash. This move is a bank accounting change that allows banks to value their gold reserves as if they were cash. Before hand, gold reserves could only be valued at 50% of cash. This obscure change in central bank policy has not made many headlines but it may be the main factor driving the price of gold over $1500.00 USD per ounce in the months following the change. Central banks had been on a shopping spree prior to March of 2019 for other reasons but central bank gold acquisitions in 2019 were double those of 2017 and the same as in 2018
The Basel III change has re-monetized gold for central banks.
Of course this doesn't matter to central banks that don't own any gold. And one of those banks is the Bank of Canada which liquidated its gold in 2016. Canada, as a signatory has adopted the new policy.
"this new system is already in place in Canada, as confirmed by Canada’s top financial regulator, the Office of the Superintendent of Financial Institutions (OSFI). Under the previous rules, gold was rated as a Tier 3 asset (there are now only two tiers), and had a 50% Risk Weighting Assessment (RWA)."
Another central bank without gold is the Bank of England which sold all of its tons of gold in 1999 at $300 USD per ounce. It seems unbelievable. Known as Brown's Bottom, it must be seen as colossal gaff in public policy. Those that don't view gold as cash but only as an archaic commodity will likely defend these moves to this day. But virtually every financial advisor continues to recommend holding 10%-15% gold in portfolios as a hedge against inflation and a traditional source of wealth. Apparently this isn't good enough for the finance ministers who executed those sales.
That advice is good for individuals and especially for Canadians. In general, the Canadian federal government does not store wealth. All of the net income the government receives is returned to Canadians in the form of benefits. (Plus a few billion that the government borrows.) While gold is not handed over to Canadians in the same way as tax deductions, the Royal Canadian Mint provides an opportunity to acquire gold (and silver) at near spot prices. This is 9999% Canadian gold., This is fine gold. This is coin of the realm, legal tender. Most Canadians have the same attitude towards holding gold as the finance minister who sold all The Bank of Canada's gold. We can all walk into a bullion dealer and buy gold maple leaf coins with our cash. Around the world, acquiring gold is not nearly so easy and affordable and legal. Gold can be held in an RRSP and a TFSA although this is not recommended for all one's gold, it is a way of making gold tax deductible. But for larger amounts, for those who cannot safely store their gold at home or who don't want to, this can be a good option. Some gold should be held in physical form and in fractional sizes for use in post apocalyptic times.
For a long time, especially in western countries, gold has been treated largely as a commodity by governments and investors, even though globally it has always been and is money. The $USD remains the reserve currency of the world despite efforts by China and to a lesser extent Russia to get out from underneath the thumb of Uncle Sam. The move by the Bank of International Settlements to re-monetize gold has allowed central banks to significantly reduce the proportion of USD$ in their reserves and many banks have done that to some extent. No fiat currency in history has ever outlasted gold. It would be prudent to heed history's lessons in good times in case of hard times, especially when the opportunity is so accessible for Canadians.
The buying of gold en masse by central banks has notably impacted annual mined supply in recent years. It seems that despite this absorption of supply, gold prices have not reacted accordingly yet. Some predicted that the Basel III policy change would cause a big spike in gold prices but a year later, we have only witnessed steady increases.
The USA sovereign debt has reached 22 trillion dollars.... Canada's sovereign debt recently reached the 1 trillion dollar milestone. While this leverage of money has added near crippling interest costs to governments, ordinary citizens have and can still benefit from the chance to convert some of this unprecedented cash flow into tangible and physical, precious metal assets such as gold. Not only can gold holdings be tax deductible, Its sale is tax free. Governments encourage Canadians to take advantage of this resource. Those who have held gold in their portfolios and purchased gold regularly through the years are now in a position to profit from the sale of some of that gold now and convert it into other needed assets.
Canada is the 5th largest gold producing nation in the world. Based on the incomes of Canadians, buying gold is relatively affordable compared to the majority of people living in the top gold producing countries. While $2000 .00 CND is real money, most working folks in China, the world's top producer, would likely have a lot of difficulty raising that much investment capital.
Gold is enjoying a bull market in recent years but who and what is driving the price?
In March of 2019 the Bank of International Settlements(BIS) in Basel Switzerland re-classified gold from a tier 3 class of assets to a tier 1 asset. Tier 1 is the same as cash. This move is a bank accounting change that allows banks to value their gold reserves as if they were cash. Before hand, gold reserves could only be valued at 50% of cash. This obscure change in central bank policy has not made many headlines but it may be the main factor driving the price of gold over $1500.00 USD per ounce in the months following the change. Central banks had been on a shopping spree prior to March of 2019 for other reasons but central bank gold acquisitions in 2019 were double those of 2017 and the same as in 2018
The Basel III change has re-monetized gold for central banks.
Of course this doesn't matter to central banks that don't own any gold. And one of those banks is the Bank of Canada which liquidated its gold in 2016. Canada, as a signatory has adopted the new policy.
"this new system is already in place in Canada, as confirmed by Canada’s top financial regulator, the Office of the Superintendent of Financial Institutions (OSFI). Under the previous rules, gold was rated as a Tier 3 asset (there are now only two tiers), and had a 50% Risk Weighting Assessment (RWA)."
That advice is good for individuals and especially for Canadians. In general, the Canadian federal government does not store wealth. All of the net income the government receives is returned to Canadians in the form of benefits. (Plus a few billion that the government borrows.) While gold is not handed over to Canadians in the same way as tax deductions, the Royal Canadian Mint provides an opportunity to acquire gold (and silver) at near spot prices. This is 9999% Canadian gold., This is fine gold. This is coin of the realm, legal tender. Most Canadians have the same attitude towards holding gold as the finance minister who sold all The Bank of Canada's gold. We can all walk into a bullion dealer and buy gold maple leaf coins with our cash. Around the world, acquiring gold is not nearly so easy and affordable and legal. Gold can be held in an RRSP and a TFSA although this is not recommended for all one's gold, it is a way of making gold tax deductible. But for larger amounts, for those who cannot safely store their gold at home or who don't want to, this can be a good option. Some gold should be held in physical form and in fractional sizes for use in post apocalyptic times.
For a long time, especially in western countries, gold has been treated largely as a commodity by governments and investors, even though globally it has always been and is money. The $USD remains the reserve currency of the world despite efforts by China and to a lesser extent Russia to get out from underneath the thumb of Uncle Sam. The move by the Bank of International Settlements to re-monetize gold has allowed central banks to significantly reduce the proportion of USD$ in their reserves and many banks have done that to some extent. No fiat currency in history has ever outlasted gold. It would be prudent to heed history's lessons in good times in case of hard times, especially when the opportunity is so accessible for Canadians.
The buying of gold en masse by central banks has notably impacted annual mined supply in recent years. It seems that despite this absorption of supply, gold prices have not reacted accordingly yet. Some predicted that the Basel III policy change would cause a big spike in gold prices but a year later, we have only witnessed steady increases.
The USA sovereign debt has reached 22 trillion dollars.... Canada's sovereign debt recently reached the 1 trillion dollar milestone. While this leverage of money has added near crippling interest costs to governments, ordinary citizens have and can still benefit from the chance to convert some of this unprecedented cash flow into tangible and physical, precious metal assets such as gold. Not only can gold holdings be tax deductible, Its sale is tax free. Governments encourage Canadians to take advantage of this resource. Those who have held gold in their portfolios and purchased gold regularly through the years are now in a position to profit from the sale of some of that gold now and convert it into other needed assets.
Canada is the 5th largest gold producing nation in the world. Based on the incomes of Canadians, buying gold is relatively affordable compared to the majority of people living in the top gold producing countries. While $2000 .00 CND is real money, most working folks in China, the world's top producer, would likely have a lot of difficulty raising that much investment capital.
