Central banks buy gold at record pace, but Canada bets on paper as prices and uncertainty climb
Gold, once considered a relic in Canada’s reserves, is now at the centre of a global rush—yet Canada, a top producer, holds none of it while prices soar to record highs, according to BNN Bloomberg.
Central banks worldwide are increasing their gold holdings, with more than 1,000 tonnes purchased annually for three consecutive years, as reported by the World Gold Council.
This trend is driven by gold’s reputation as a hedge against inflation, currency depreciation, and bond market risk—a point emphasized by Bart Malek, head of commodity strategy at TD Securities, who calls gold “an asset… no one’s liability, and there’s no counterparty risk.”
Malek argues that Canada’s exclusive reliance on paper currencies, with over half its US$127bn in reserves held in US dollars, leaves it exposed, especially as global confidence in the US dollar wanes.
Despite these global shifts, the Department of Finance maintains that holding high-quality, interest-bearing, foreign-currency assets is better suited to protecting the Canadian dollar’s value than gold.
The department notes that Canada has not intervened in currency markets since 1998 and has managed without gold since selling its last reserves in 2016, a process that began in the 1960s when Canada’s gold reserves once stood at 1,023 tonnes.
This policy stands in stark contrast to the actions of countries such as China, India, and Poland, which are actively accumulating gold.
According to the World Gold Council, 73 percent of central banks expect the US dollar’s share of global reserves to fall in the next five years, and 43 percent plan to increase their gold holdings.
The irony is heightened by Canada’s position as the world’s fourth-largest gold producer, with output up 31 percent over the past decade, according to the Mining Association of Canada.
Pierre Gratton, president and CEO of the association, notes that holding onto gold could have significantly improved Canada’s fiscal position, especially given today’s high prices.
The impact of record gold prices is also being felt in the Canadian jewellery sector.
As reported by CBC News, brands such as Mejuri and Melanie Auld have raised prices in response to surging costs, while others are seeking efficiencies or alternative materials.
Jewellery designer Reena Ahluwalia observes that luxury brands can absorb the price hikes, but mass-market players and wholesalers are feeling the squeeze.
For institutional investors and pension managers, these developments underscore the evolving role of gold as a portfolio diversifier and a shield against economic uncertainty.
As John Ing, president and CEO of Maison Placements Canada, puts it, gold is “sort of like fire insurance”—a hedge against the unpredictable, especially as central banks and investors reassess the future of the US dollar.
