Pandemic-driven demand for safe-haven investing sends sales of gold bullion soaring, Canadian mint says
|Toronto Star 08 Jul 2021 at 17:43|
Coins gathered dust on dressers, sat untouched in car cupholders and languished in bulky wallets no longer cracked open to pay for parking, the bus or a coffee.
As the pandemic sent the majority of office workers home and prompted stores and restaurants to ask for plastic payments instead of cash, there was a “material decline in coin demand from the retail sector” in 2020, according to the Royal Canadian Mint.
But revenues soared at another key business for the Ottawa-based Crown corporation: sales of bullion.
The market for the mint’s distinctive gold and silver maple leaf coins, as well as refined gold bars, soared amid turbulent markets, as both retail investors and large financial players such as pension funds sought the safety of precious metals.
The mint’s net revenue from the sale of bullion products and services, which include the secure storage of precious metals, surged by 94 per cent to $2.3 billion last year.
“There was a huge appetite for safe-haven investment assets, and precious metal is always a place people go when there is disruption or uncertainty in the marketplace,” said Lorne Whitmore, managing director of the mint’s precious metals sales business, adding that the heightened demand continues to this day.
“We’re still seeing a huge amount of demand for both gold and silver in the marketplace and it’s broad-based, (from) across the world.”
Canada’s mint is a major player on the global bullion scene, in league with the U.S. Mint and Australia’s Perth Mint.
The mint launched its gold maple leaf coin in 1979 and the silver option in 1988, and both gained popularity and market share as an alternative to the world’s then-dominant bullion option, South Africa’s Krugerrand, which was facing economic sanctions for that country’s policy of apartheid.
Whitmore said that a relatively long history in the market — three to four decades — as well as investments in high levels of purity and security features to guarantee the coins’ authenticity, helped boost the mint’s status as a “trusted brand of precious metals” during the pandemic.
“That’s why we found our products resonated so strongly in the marketplace,” he said.
Still, despite the surging bullion sales, the mint’s overall profit actually declined somewhat last year; profit before income taxes dropped to $27.5 million, down from $42.3 million in 2019, according to the mint’s annual report.
That was in part because the costs to buy precious-metal materials increased last year. Plus, to keep up with bullion demand, the mint paused the production of collector coins, known as numismatics, for about two months, causing a drop in sales.
The sale of coins for Canadian circulation also fell, but not by much considering the drop in demand. The mint sold 338 million new coins to financial institutions last year, down just 8 per cent from 366 million new coins in 2019.
That was because banks still need a supply of coins and weren’t getting as many recycled coins back as they usually would through public transit systems, parking and coin recycling kiosks.
Yet, unlike the U.S., Canada didn’t experience a widespread coin shortage last year. Alex Reeves, a spokesman for the mint, said that was because the Crown corporation handles both the production of coins as well as their distribution through armoured car companies.
In the U.S., the mint makes coins while the Federal Reserve distributes them, and, by the summer of 2020, coins were hard to come by, with officials imploring people to pay with exact change or drop coins off at recycling kiosks.
“While the closures of retail and hospitality businesses did partially affect the typical flow of coinage throughout the country, the (Canadian) mint was able to work with financial institutions and armoured carriers to maintain supply where and when needed,” Reeves said.
The mint has about 1,100 employees and two production facilities, in Ottawa and Winnipeg, and while it stopped making bullion for a week or two in the early days of the COVID-19 pandemic, Whitmore said it never stopped its refinery operation. That serves mining companies, primarily Canadian miners, which send the mint raw materials to be converted into gold and silver bars and sold.
The mint also retooled last year to make supplies for front-line workers, producing 3,800 litres of hand sanitizer and 2,900 face shields.