LETTERS TO THE EDITOR — Selloff depresses gold price

At a time of genuine economic crisis, the Bank of Canada is selling off our gold reserves at a dangerously high rate. Notwithstanding the security our formerly enviable gold reserves were able to provide, it also seems that such a policy works to the ultimate disadvantage of the more than 12,000 Canadians employed by our gold mining industry.

Almost every industry analyst and gold expert has registered a great deal of concern regarding this massive selloff. Other central banks around the world are pursuing a diametrically opposite policy, trying to shore up their gold reserves while the current world price remains relatively low. Canada is the only G-7 country known to be selling off gold reserves under the guise of trying to stabilize the balance of payments deficit.

According to the Washington-based Gold Institute and Credit Suisse First Boston, gold prices become weaker due primarily to central banks’ efforts to sell off reserves. A conservative estimate finds that the sale of 100 tons of our reserves in 1992 would have accounted for a $6-7 drop in world price. This would account for a loss of $6-7 million in pretax profits for producers who can extract one million ounces a year.

When one source dumps one-quarter of the world’s supply of any commodity on to the market, as we have done with gold, then the world price will drop. The world price of gold as of mid-January stood at US$327.55 per oz. This is very close to being an uneconomical price for our gold producers to live by. The Bank of Canada’s efforts should be directed toward strengthening the market for our producers by using its leverage to maintain a higher world price. Yet it is doing the exact opposite. This is a harmful policy for those in our mining industry and, ultimately, for all Canadians.

David Kilgour, M.P.

Edmonton Southeast

Official Opposition Critic

for Energy, Mines & Resources

Ottawa