Question of the week: Why did Canada sell off the rest of it’s gold holdings? The official reason is that stocks are more liquid and there are a deeper pool of buyers and sellers. That’s not really true when you look at the size of the gold market and the global factor that it represents. The purpose of holding gold is to hedge against dollar risk. By holding equities it would not matter how diversified the portfolio is it’s all denominated in a currency. One would have to ask how much value the currency has and how strong it is. Central banks typically hold gold to hedge against devaluing dollars and maintain sovereignty.

Where does Canada rank among 100 central banks for gold holdings? Dead last.

China is the second largest economy but does anyone talk about China’s ghost cities which have represented 25% of its growth? Jim Rickards’ latest article puts a spot light on the debt issues that China has. Debt is a global issue and precious metals hedge against the liquidity issues that occur when debt bubbles burst. https://dailyreckoning.com/rickards-debt-bomb-ready-to-explode/

The Andy Warhol is down in recent years as an article in Bloomberg points out. https://www.bloomberg.com/news/articles/2018-10-31/warhol-sales-are-in-a-rut-can-whitney-show-bring-the-mojo-back. This is a demonstration that the art market is susceptible to volatility. The diamond market on the other hand experiences little to no volatility. On the show we compare the number of Warhol’s works to the number of VS quality pinks to see just how rare a VS quality pink diamond really is. This is why the diamond market is underpinned. Also, unlike real estate or art, natural fancy color diamonds is a market without debt investors, meaning investors rarely (if ever) use debt to make a diamond acquisition.

We talk about a recent sale of a diamond at Guildhall that was considered to be 1 in 100,000,000.

From now until the end of December, Guildhall is offering a set of diamond studs with the acquisition of a natural fancy color diamond over $25,000.

 

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