1nvest wrote:Gold as a currency has : liquidity (the mechanisms for buying and selling gold are well established, well regulated, and global); Independence from fiat currencies (not issued by a government); No counter-party risk; Also it has a degree of multi-year inverse correlation to stocks.
For a US investor who yearly 50/50 stock/gold across 1980's and 1990's, the price of gold sank -44%, but they ended that two decades with over 8 times as many ounces of gold at the start.
Yes currencies have attempted to peg to gold, but all fiat currencies ultimately have failed. Sooner or later the pressures to debase arise, and when fiat currencies are backed by nothing at all its even more tempting for the 'legal counterfeiter' to abuse that position and print/spend money at the cost of all other notes in circulation. In September 1931 the Bank of England had to break the Pound away from the gold standard, as largescale holders of Pounds were converting those notes into gold and British gold was being taken out of the country. In August 1971 President Nixon did the same for the US$ for the exact same reasons.The major reason for the change was that Britain had pretty much run out of silver as it was all being used to purchase goods from China - the Chinese not being interested in buying manufactured goods from europe but the europeans and british being very keen on buying tea, silks and other goods from China in exchange for silver. The balance of trade was only corrected by force with the opium wars.
And here we are yet again, buying from China, not exporting much in return. Yet another Opium war in the making? No! Fortunately if China stopped buying the US$ (Treasury's) it wouldn't make much difference, in fact they did pretty well stop buying back in 2011. Similarly if they dumped the US Treasury's they do hold then whilst it would cause a short term shock/decline, so others would take up that slack. https://www.forbes.com/sites/gordonchan ... 71f7f162c4
Whilst some central banks have dumped their gold (Canada) in total faith of fiat, most central banks still keep stockpiles of gold - just in case.
Canada is in quite a special position in that it is a huge gold producer. I expect they saw no need to double up and also hold gold.