The Mile of Gold

As a child, I spent many a summer vacation with my aunt and uncle, themselves childless, in the northern Ontario mining town of Kirkland Lake.  But not just a mining town, mind you—a gold mining town.

To my young eyes, it was the most romantic place ever, evoking visions of places I had only read about—the California gold rush in 1849, the Klondike gold rush in 1896.  Chasing the allure of gold, hundreds of thousands of prospectors, all sure they would strike it rich, embarked on a long, arduous, often-fatal trip to California or the snowy Yukon, most of them to be sorely disappointed.

Kirkland Lake was like one of those destinations for me, akin to the wild west of my imagination.  Why, it was there I first saw the Gold Range Saloon (from afar), looking just like the ones I saw in the movies, but more real.  And it was there I spied my first drunk, a poor soul passed out on a bench in front of it.

As you entered the town, a prominent arch over the roadway proudly proclaimed:  Kirkland Lake – Hub of the North on the Mile of Gold.  A whole mile of gold was beyond my ken.

hub

I was puzzled, though, that there seemed to be no Kirkland Lake in Kirkland Lake, and I asked my uncle about that.  He was a mining engineer who regularly inspected the  mines in the area, many with fabled names, at least in my estimation—Teck-Hughes, Lakeshore, Wright-Hargreaves, Toburn, Macassa, and Upper Canada among them.  They’re gone now, or subsumed by the modern mining conglomerates whose names evoke none of the romance of the period.

“There used to be a lake over there,” my uncle told me, pointing to the northwest, “but it got filled in by tailings long ago.”  Tailings, I came to understand, were the residue of the mining industry.  Slag.

From their house, my aunt and uncle could see the tall headframes of three of the mines, and their chimneys from which smoke almost always rose.  I was amazed how my aunt would check the direction of the wind by noting which way the smoke was blowing, determine falling or rising air pressure on her barometer, and forecast the weather for the next day or so.  That was extremely important to me, because a sunny day almost always meant a trip to the golf course where I would caddy for her or my uncle.

Like most Canadian boys back then, I was an avid hockey fan, and my favourite team was the Toronto Maple Leafs.  On one joyous day, my uncle played golf with one of the team’s young stars, a hometown boy named Dick Duff.  For me, that was like being in the presence of a god!

duff

Kirkland Lake was the birthplace of dozens of professional hockey players in those good old days, including Duff, Ted Lindsay, Ralph Backstrom, Mike Walton, Bob Murdoch, Tom Webster, Daren Puppa, Floyd Curry, Dick and Mickey Redmond, the three Plager brothers (Bill, Bob, and Barclay), and the three Hillman brothers (Floyd, Larry, and Wayne).

Gold itself was an abstract commodity to me at my tender age, nothing more than the justification for the town’s existence, and therefore the reason I was able to spend my idyllic summers there.  To this day, a watercolour of the Teck-Hughes headframe hangs in my home.  I loved Kirkland Lake, but not for the gold.

teck-hughes-south-peter-midtskogen

My interest in gold was sparked many years later, however, upon my aunt’s passing, when I inherited a small amount of bullion which she and my uncle had purchased over the years.  They believed in investing in commodities that would retain their value, if not increase it.

The price they paid was significant to them, I’m sure, but not nearly what it would cost today.  For a variety of reasons, not the least of which is the steady erosion of fiat currencies around the world, gold and other precious metals have tended to hold on to their value over the past fifty years.

Those currencies—which are really nothing more than IOU’s from the government that prints them—can fluctuate wildly in value, compared one to another, and are subject to both inflationary and deflationary cycles, depending upon their availability or scarcity, and the vagaries of the global economy.

fiat-money-overview

It has long been held that, as the spending power of currencies declines, the worth of gold and silver increases.  One of the causes for this is the limited amount of these precious metals worldwide; one estimate has it at seven billion ounces of gold, one billion ounces of silver.  Moreover, it is becoming increasingly expensive to extract more of the metals from the ground.

Currencies, on the other hand, tend to lose spending power over time.  An identical basket of goods selling for one dollar in 1946, for example, might sell today for almost twelve dollars, twelve times as much.  In that same year, the major powers determined to fix the price of gold at US$35/ounce, in an attempt to ensure stability in world financial markets.  That standard was abandoned after 1971 because many of the leading industrial nations were printing more money than their gold reserves would support.  Too much scrip, not enough metal.

Using the same 1946 – 2014 inflation calculation, the price of gold today would be worth approximately US$420/ounce.  The reality, however, is that gold is currently valued closer to US$1300/ounce, and has been as high as US$1900/ounce, a testament to people’s declining confidence in fiat currencies.  Investors know that governments can’t print precious metals.

gold

Now I wouldn’t call myself savvy in the ways of the financial world.  I have, however, returned to those Kirkland Lake roots over the past several years, and begun to supplement the gold left to me by my aunt and uncle.  Real metal, mind you, not paper promissory notes.  The seed they planted has blossomed and will, I devoutly hope, eventually bear fruit.

I haven’t been back to Kirkland Lake in half a lifetime.  Those iconic headframes may no longer stand, stark against the sky, and the chimneys may no longer spew their acrid smoke.  But I metaphorically look to them to see which way the wind is blowing, I check the barometrics of precious metal prices, and I try to predict the financial forecast.

I hope my aunt and uncle would be proud of me.

kirkland