Wednesday, January 1, 2014
Bank of Canada's gold coins to be liquidated in federal push to balance books
Posted by Charleston Voice
Canada’s first gold coins had barely been minted before Ottawa yanked them out of circulation a hundred years ago in an effort to stop gold from leaving the country during the First World War.
After a century of sitting in cloth bags inside the Bank of Canada vault, they are among a wide range of assets the Conservative government is liquidating – in this case literally – to save taxpayers a few dollars and help balance the books. The plan is to melt down more than 200,000 gold coins from the years 1912 to 1914, when Ottawa suspended the gold standard.
The coins have been the subject of whispers among collectors curious what happened to the $5 and $10 gold coins that Ottawa had pulled out of circulation. The mystery was lifted late last year when the Bank of Canada announced it would be offering 30,000 of the bank’s
246,000 coins for sale to collectors.
The sale is unlikely to make a big difference to Ottawa’s bottom line, but it is among a string of recent moves by the federal goverment to unload public assets as it moves to balance the books by 2015. Ottawa is in the process of selling off a variety of items, from foreign embassies to port lands. But the government’s decision to cash in on high gold prices by selling and melting the coins upset some coin collectors. Those who already had the coins in their collection did not appreciate the flood of new coins into the market, which could push down the value.
The $10 coins sold for either $1,000 or $1,750 each, depending on whether they were “premium” quality or not. The sale recently closed.
Final numbers won’t be known until the spring, but a mint official confirms they came very close to selling all the coins. In fact, the move created a bit of a gold rush among Canadian collectors.
“It’s the most popular topic for 2013, for sure,” said Michael Wang, a Vancouver coin collector who bought individual coins and also paid $12,000 for a six-coin set. “My wife was about to kill me when I told her I bought this thing,” he said, laughing.
But unlike some who were disappointed with the coins, Mr. Wang has no regrets. “Just to hold a piece of history in Canada, that’s really the important part,” he said. “This is Yukon gold or Ontario gold from back in the 1910s. It’s not like recycled gold that people are getting now from jewellery and other things that are being melted and refined. This is the actual, physical gold that came out of the ground.”
The coins had been sitting in bags at the Bank of Canada in Ottawa for decades. They were officially recorded as part of Canada’s gold holdings in the Exchange Fund Account of foreign currency.
A copy of the private agreement between the Department of Finance, the Royal Canadian Mint and the Bank of Canada offers some insight into the government’s motivation for the sale. The agreement, which was obtained through Access to Information by Ottawa researcher Ken Rubin, said the objective was to improve the liquidity of the government’s assets, provide a piece of Canadian history to coin collectors and to “extract value from coin sales for the government and taxpayers.”
Canadian currency was pegged to the price of gold from the pre-Confederation days in 1854 to 1914, reflecting a common international practice of the time. These were the first gold coins to feature a Canadian symbol: the Arms of the Dominion of Canada. The other side features King George V.
Canada briefly returned to the gold standard in 1926, but effectively abandoned it for good in 1929. The United States effectively abandoned the gold standard in 1933, but didn’t make the move official until the 1970s.
The Canadian coins weigh roughly eight grams for the $5, and 16 grams for the $10, and are 90 per cent gold. Ottawa and the Royal Canadian Mint packaged and marketed them as collectors’ items at prices above their melt value.
“These sorts of things don’t happen very often,” said Bret Evans, managing editor of Canadian Coin News. “We knew the Bank of Canada had scooped them up, but the exact information, how many were there, whether they still existed even was not known. … The hobby has long been fuelled by rumours of what were in the bank’s vaults.”