REAL PRICE OF TSX Real Estate & Gold Indexes
Nominal Prices divided by Bank of Canada $CAD Commodity Index
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The chart above shows the "real" price of the TSX real estate index (RE/CCI green dotted plot line) and the "real" price of the TSX gold index (Gold/CCI yellow dotted plot line).
In May 2017, the CA$ Commodities Index (CCI blue solid plot line) slowed down its advance under a weakening energy sector that is set for a seasonal drop. There is CCI support at or just below the March 2009 Pit of Gloom low and currently the CCI remains near the lower bound of this 14-15 year channel.
In May 2017, the CA$ Commodities Index (CCI blue solid plot line) slowed down its advance under a weakening energy sector that is set for a seasonal drop. There is CCI support at or just below the March 2009 Pit of Gloom low and currently the CCI remains near the lower bound of this 14-15 year channel.
The real price of the TSX Real Estate Index (green dotted plot line) remains very highly elevated but dropping quickly below the 2015 spike. It's turning into an even more dramatic top than the 1Q 2007 peak.
The summer of 2016 spike in the real and nominal prices of gold was followed by a plunge into 1Q 2017 but the plots are working their way back up on trend. War and the rumours of war as well as headlines out of the Middle East, Russia, Europe, China, North Korea, energy producers, the Fed and the Trump administration are going to produce a slippery wall of worry for 3Q 2017.
The TSX Gold index has been under performing the TSX Real Estate index for the last 49 months but the commodity crash (lower fuel and material costs) is a strong positive for gold miners and explorers going forward especially with the recent nominal gold price breaking out of the top of the base begun in 2013.
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In the 1929 stock market crash, Homestake Mining, the representative gold miner of the day, outperformed the DJIA. |
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Gold miner's profitability depends on the nominal price of gold but also the cost of getting the metal out of the ground.
When the cost (fuel, and industrial materials) goes down, the real price rises even in the absence of a nominal price rise. Gold mining share prices rise as the real price of gold rises.
When the cost (fuel, and industrial materials) goes down, the real price rises even in the absence of a nominal price rise. Gold mining share prices rise as the real price of gold rises.
