A 100-kg Canadian gold coin

The Royal Canadian Mint has produced the world’s first 100-kilogram gold coin with a face value of $1 million. And they’re for sale.

Why did it do this? “Because we can,” the mint said on its website.

The Royal Canadian Mint displays one of its new 100-kg, pure gold bullion coins.
(Canadian Press/Tom Hanson)

The coin is the size of a “very thick pizza” — 50 centimetres wide and three centimetres thick — and is .99999 pure.

It was originally meant to be a one-off novelty item to help promote the other gold coin the mint unveiled Thursday — a new line of one-ounce Maple Leaf bullion coins that will have a face value of $200.

But after several interested buyers came forward, the mint decided to produce “a very limited quantity” of the $1-million coins on a made-to-order basis for public sale.

Even though the big coin has a face value of $1 million, it won’t sell for that. At current prices, the coin’s 3,215 troy ounces of gold are worth well over $2 million.

A mint spokesperson said the coins will sell for between $2.5 million and $3 million. So far, the mint has received confirmed orders for five coins.

The Royal Canadian Mint faces international competition from a variety of other countries that also make gold coins.

African Barrick gold mine attacked

African Barrick Gold, a division of Toronto-based Barrick Gold, said Tuesday seven intruders were killed and a dozen more were injured Monday at its North Mara mine in Tanzania.

The company said 800 “criminal intruders” were trying to steal ore from the mine when police were called. It says the thieves attacked the police with machetes, rocks and hammers.

African Barrick said the police have increased their presence in the area and are investigating. The company has also started its own review.

“Although full details are yet to be confirmed, African Barrick Gold sincerely regrets any loss of life or injury on or near its mine sites,” the company said in a statement.

“The company will continue to support the government and the community in their efforts to improve law and order and security in the North Mara region.”

The company said the incident had no material impact on operations.

Produced about 213,000 ounces in 2010

The company said 1,753 people worked at the mine at the end of last year including 829 African Barrick employees and 924 contractors.

North Mara produced about 213,000 ounces of gold in 2010.

Bullion reached an all time high of $1,575.79 US an ounce on May 2 after gaining 30 per cent in 2010. June gold was closed Tuesday on the New York Mercantile Exchange at $1,480.00 US, down $10.60.

The mine is situated in the Tarime district of Mara region in northwest Tanzania, approximately 100 kilometres east of Lake Victoria and 20 kilometres south of the Kenyan border.

Barrick Gold, the world’s largest gold miner, holds a roughly 74 per cent stake in African Barrick, which owns the company’s former mines in Tanzania.

Shares in African Barrick, which trade in London, closed down 5.75 per cent at 4.69 pounds Tuesday.

Why are gold prices so volatile?

There are a million golden theories to address the rise and fall in the market price of the precious metal. Most relate to supply and demand. When prices rise, some analysts point to heavy buying from central banks or hedge fund managers or investors wanting to diversify their investments away from perceived weak currencies.

The growing middle class in India and China has been mentioned as one reason why demand for gold has been growing; jewelry is, after all, the biggest use for gold.

Traditionally, weakness in the exchange value of the U.S. dollar has also been bullish for gold prices and the dollar weakened dramatically against a wide basket of currencies throughout 2007, reaching an all-time low against the euro and a 31-year low against the Canadian loonie.

When prices fall dramatically, analysts look for signs that central banks are selling off their gold reserves. Many countries have been doing that. The Bank of Canada, for example, has sold most of its gold reserves and held just $78 million US worth as of September 2007. But recently, the wider demand for gold has offset central bank selling as the weak U.S. currency had investors rushing into gold.

Gold has long been a traditional hedge against inflation and demand for gold tends to pick up when inflation does.

And some price movements may simply be due to speculation from short-term traders who notice big price swings in either direction and want to join what they see as a bandwagon.

Investors are left wondering whether the next climb or plunge is just around the corner, followed by years of stagnant returns.

Should I buy gold and if so, how can I get some?

Financial planners generally advise their clients who want a stake in gold to keep their precious metals holdings to a small part of their overall portfolio – at most five or 10 per cent.

There are many ways to acquire gold. You can buy gold coins, gold wafers or bars, or gold certificates.

• Gold Coins: A number of countries mint gold coins. Britain has been producing sovereigns for centuries. Austria, China, the U.S. and Mexico also produce gold coins. South Africa has produced its Krugerrand coins since 1967. Canada joined the gold rush in 1979 with its Maple Leaf gold coin. At .9999, it’s the purest gold coin in the world. It’s available in six denominations from 1/20th of an ounce up to one ounce. There is a small premium charged on the gold value of the coins. Maple Leaf coins are available from the Royal Canadian Mint, some coin dealers and some banks. Be aware that some Canadian gold coins are aimed at collectors and sell for considerably more than their gold value. So if you just want a coin for the gold content alone, buy Gold Maple Leaf coins. No GST is charged on gold coins if they are refined to a purity of at least 99.50 per cent. But some provinces charge sales tax on gold coin sales.
• Gold wafers and bars: There’s nothing quite like the sensation of tossing around a 400-ounce gold bar. Banks can sell you bars and wafers ranging from 1 ounce to 400 ounces for a small premium over the spot gold price. Most financial institutions will also rent safety deposit boxes to store your golden haul.
• Gold certificates: You can also own gold in certificate form. Most banks can issue paper certificates that are backed by the bank’s assets. There are no fabrication, shipping or insurance costs and no sales tax to pay. They can be sold easily or exchanged for physical bullion. They are made out of paper.

You can also invest in companies that mine gold. There are dozens of gold companies listed on the Toronto Stock Exchange. Some of the biggest Canadian companies for example are Barrick Gold, Kinross and Goldcorp. International gold mining giants include Newmont Mining, AngloGold Ashanti and Gold Fields Ltd.

There are dozens of precious metals mutual funds that will give investors a stake in a variety of companies that mine gold and other precious metals.