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Mar 02, 2015

Playing the Exchange Rate Game

By   ghaccess   |   Tags:Bullion, Gold, Gold Coins, Gold Maple Leaf, Hard Assets, Precious Metals, Silver, Silver Coins   |   Category: Blog

For Canadians, precious metals have gotten more expensive in the last few months. The lower Canadian dollar has deterred many Canadian precious metals buyer simply because they do not want to deal with the higher exchange.

There is a feeling of almost resentment at the exchange rate and a sense that it could change at a moment’s notice, making bullion buying more amenable. We all want the best possible price right? Wrong. Buying gold and silver is not necessarily about the price one pays. If this were the case Canadian’s would be buying as much on a percentage basis as India and China. We simply are not. Purchasing precious metals is a vote against fiat currencies and a safe haven against the rise and mostly fall of these currencies over time. Canada is not an exception to the rule. It is a fiat currency just like the US dollar, the Pound, the Yen etc.

Should the lower Canadian dollar stop people from buying bullion? That may depend on how you answer the next question; Were you expecting a rate cut and the subsequent drop in the Canadian in the first place? There is little doubt that we have reached a stage of mass distortion in all markets. We should expect the unexpected. If one did not expect the dollar to drop then it would be just as difficult to predict when it will go back up. Forget the fact that silver trading in the low $20 CAD is already ridiculously cheap. Forget the fact that gold and silver are already extremely undervalued against the excess of money creation and debt. Owning bullion is a hedge against volatility, a hedge against the unexpected.  Ask Russians if they would have liked to own gold in the last six months as their currency fell and they started experiencing inflation. Ask anyone in Cyprus, Argentina, or Venezuela… heck; ask Canadians if they would have loaded the boat on gold and silver back in December had they known it would have been more expensive today.

Holding bullion is about protecting wealth. As a currency that has been a store of value for centuries, it has a much better track record of maintaining value than volatile or depreciating fiat currencies. For those that have more than 10% of their net worth in bullion they certainly have the luxury of waiting for additional buying opportunities. For those building a bullion portfolio, waiting for an opportune time to buy could be a risky affair. In the end, I believe that what will be important is how much one owns rather than the price one paid.

 

Jeremy Wiseman

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