By Bret Evans
Although a great thing for collectors, Canada’s effort to create circulating gold coins was probably doomed from the outset.
Plans for circulating gold coins are almost as old as Canada.
In the late 1890s, the Klondike gold rush was in full swing. It was the biggest gold rush North America had even known, and most of the precious metal was finding its way to Seattle or San Francisco instead of Canada.
Advocates of circulating gold coins were keen to see a domestic market for gold, and there were issues of national dignity.
Canadian banks, on the other hand, were not interested in the idea of gold coinage at all, seeing it as competition for their lucrative revenue from printing banknotes.
As early at 1901, the Canadian government committed to gold coins. Finance Minister William Stevens Fielding even went as far as asking Lyman George, head of the U.S. Treasury, if it was possible to make Canadian gold coins legal tender south of the border, offering to make U.S gold coins legal tender in Canada.
Fielding saw it as an advantage for international trade. At this time, debts between banks were settled by transferring ownership of gold or by using government notes backed by gold, and debts between nations were usually paid in gold.
The idea of gold coinage was soundly rejected, and these plans were put on hold.
OTTAWA BRANCH OPENS
When the Ottawa branch of the Royal Mint set up operations, one of its stated objectives was to produce gold coins. In the absence of any Canadian gold coins, British sovereigns were struck, with the first issue being struck in 1908. The Mint regulations of 1909 stated gold producers sending ore to the Mint for refining would be paid in sovereigns as far as possible, with any fractional balance being paid by cheque.
That didn’t mean the government had given up on Canadian gold coins. In 1907, it had reaffirmed the idea, planning to produce coins with values of $2.50, $5, $10, and $20, copying the U.S. system.
In 1908, Fielding asked the Royal Mint in Britain to work on designs for a series of gold coins using the Canadian coat of arms on the reverse.
At the same time, alternate designs were sought from the Paris Mint as well as Henri Dubois, designer of the 1908 Quebec Tercentenary Medal, and several other medalists.
The coat of arms design continued to be the favourite, and discussions began to focus on details. Because Fielding wanted the denomination spelled out in words, the $2.50 value was abandoned.
Even so, in 1910, when the Currency Act was amended to include gold coins, all four aforementioned values were included in the legislation. The act also specified for the coins to have a purity of .900 and the same weight as their U.S. counterparts.
The death of King Edward VII in 1910 meant the Mint had to focus on new coin designs and master tools, so the idea of making gold coins was put on hold. Designs were approved, but there was no time to produced master tools.
In any case, it was not a pressing issue. Delays in the construction of the refinery at the Ottawa Mint meant the supply of gold was limited. Metal was being sent to government assayers for refining, but the refinery would not be completed until January 1911.
At this point, the government was keen to start and pressured the Royal Mint for master tools for $5, $10, and $20 gold coins.
Tools were sent for the two lower denominations only. The Royal Mint explained Fielding had ordered the tools in 1909 to focus on $5 and $10 coins and never rescinded that advice.
The designs still required government approval, but once again there were delays. By late 1911, it was clear it would be another year before Canada saw circulating gold coins.
Production began in July 1912. While there was a brief surge of interest, most Canadians didn’t seem interested in carrying gold coins around.
The vast majority of them ended up in the government’s hands, eventually being held by the Bank of Canada as part of Canada’s strategic gold reserve.
But with the First World War came changes to the Finance Act. Banks were authorized to pay their debts using their own notes, and the redemption of government notes in gold coins was suspended.
While visitors at the Ottawa Mint could still buy gold coins as souvenirs, no gold coins were released into the banking system. Concerned about wartime costs, the federal government was holding as much gold as possible to pay foreign suppliers. Those suppliers, mostly in the U.S., redeemed government cheques at banks in that country, and those banks preferred to be paid in standard gold bars rather than Canadian gold coins.
In January 1915, the Finance Department cancelled all orders for gold coins and instructed the Mint to produce only gold bars.
The production of gold coins was never resumed. Most of the coins produced remained in bank vaults for the better part of a century.
Recently the Bank of Canada divested itself of the coins, melting most of them but selling the remainder to collectors through the Royal Canadian Mint.
After the war, most nations returned to the gold standard, but just a few years later they again suspended the redemption of notes for the precious metal.
The Great Depression saw a rush to redeem government notes for bullion, which reduced the money supply. In Britain there were several speculative runs on the Bank of England, and in the U.S. the situation became so bad that private ownership of gold coins and bullion was made illegal from 1934-75.
By the end of the Second World War, a new system, the Bretton Woods system, all but eliminated the individual’s right to redeem paper money for gold while allowing governments to exchange currency for gold at fixed rates.
Initially the value of an ounce of gold was set at $35 US. This system, which often saw the exchange rate lower than the market value for gold, was untenable. Starting in the late 1970s, more nations abandoned the gold standard, letting their currencies float on the market.