The British are coming—for our gold

On April 2, Bank of Canada Governor Mark Carney stepped in front of a business crowd in Waterloo, Ont. to speak about the state of Canada’s foreign trade. His message, more or less, was this: we need to break our national reliance on exports to the U.S.–the country is a wounded behemoth, and we would do better to focus on trade with economic up-and-comers. By that the governor probably meant the likes of China and India. But by looking at our trade numbers, one would think Canadian exporters are taking it to mean the U.K. as well.

Over the past decade, the value of Canadian exports to the centre-piece of the Commonwealth have skyrocketed. In 2011, they hit a record high of $18.8 billion, up more than 324 per cent since 2002. The U.K. is now Canada’s second biggest export partner–while China is only third.

The Brits are importing a number of things from Canada: from uranium, nickel and sawdust, to sheets of newsprint and kidney beans. But the real story here is about gold. In 2011, Canada sold to the U.K. a whopping 63 per cent of the $16.8 billion-worth of non-monetary, unwrought gold (which includes gold powder, coins, bars and bullion) it exported worldwide. That was over four times the relatively paltry $2.8 billion of Canuck gold the U.K. bought in 2007.

So what’s going on? It’s the “double whammy effect” of nervous investors stocking up on gold amidst volatile financial markets and gold prices rising as a result of this increased demand, says Michael Burt, director of industrial economics with the Conference Board of Canada. And because the U.K. is home to the London Metals Exchange, one of the world’s most important trading hubs for the industry, billions of dollars worth of gold have been travelling across the Atlantic as investors turned to gold.

It’s good news for the Canadian mining industry, which stands to profit (although they didn’t do quite so well last year, partly due to a string of bad luck). Burt and others predict Canada will soon be able to sell even more of the stuff as new gold mines come online over the next few years. Production at the Detour Lake gold mine in northeastern Ontario, for example, is slated to begin next year. In Eleonore, Que., a $1.4 billion mine project is scheduled to start digging up the metal in 2014. “There are a lot of potential projects on the books,” says Burt, “we are getting more money for what we’re selling.”

And, evidently, traders in London want it badly.