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."
Not all collectors were happy with the government's decision. "They should have melted them back in 1912, 1913 and 1914," said Frank Rossi, owner of Universal Coins in Ottawa.
Mr. Rossi said collectors who already had these coins were not pleased with the sale because it drove down the value of their collections. "A market had been established," he said. "Then all of a sudden all of these coins start appearing. … This has diluted the market. I don't even think those coins that they did issue were in that great of a shape anyway. The coins were way overvalued. … They sold the sizzle, they didn't sell the steak."
It is not clear yet whether the sale did in fact push down the value of the coins. Tracking of prices by Canadian Coin News shows prices held constant throughout the sale, but that could be because there hasn't been a lot of data lately on sales of the coins between collectors.
While buying the coins may not have been a great financial move for Canadians, it appears to have worked out well for the government. A spokesperson for Finance Canada said the government expects to make a "modest" profit from the coin sales, but it is too early to say exactly how much. In an e-mail, David Barnabe suggested that none of the remaining coins has yet been melted.
"The government is considering various options to manage the remaining gold coins," he said, "including timelines for melting and any resale of the bullion."