"...the White House’s actions are not helping U.S. trade because they are fueling the dollar (USD)... now at a 16-year high in real effective terms." "...we’re less bullish about the loonie’s (CAD's) longer term prospects given Canada’s chronic external deficit and the way it is financed." National Bank of Canada, DEC 2019
REAL PRICE OF TSX Real Estate & Gold Indexes, ie: Nominal Prices divided by Bank of Canada $CAD Commodity Index
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The chart above shows the "real" price of the TSX real estate index (RE/CCI green dotted plot line) and the "real" price of the TSX gold index (Gold/CCI yellow dotted plot line). July 2019, StatsCan revised their data set on the CCI metric and produced a new peak at July 2005 which I have labelled.
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In August 2020, the CAD$ Commodities Index (CCI blue solid plot line) continued up towards the long term downtrend plot line after bouncing off the April 2020 Covid 19 low. A year ago, in July 2019, StatsCan revised their CCI data set and produced a new peak at July 2005 (Hurricane Katrina) above the July 2008 WTI price peak and since those peaks, the trend has been lower highs. |
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The commodity downtrend accelerated with the 4Q 2014 crash in crude oil prices and by 1Q 2016, gold and real estate buyers went long again.
Since April 2013 nominal real estate prices have indeed been the gold standard with the divergence widening relative to nominal gold (solid plots). But the animal spirits have Covid #19 to deal with now.
For seven years, from April 2013 to March 2020, TSX Gold under performed TSX Real Estate but in April 2020 that nominal metric switched with the Covid 19 crash in the commodity plot (CCI).
The fly in the ointment for Canadian gold buyers could be the rising USD:CAD ratio that will dampen enthusiasm for precious metals and other commodities.
Meanwhile, the door to deflation has been opened by a two-fisted crude crash and a viral contagion.
Gold miner's profitability depends on the nominal price of gold but also the cost of getting the metal out of the ground. See the real time StockCharts.com $HUI:$CRB chart (gold miners / commodities ratio) which shows that as the cost of mining drops (fuel, and industrial materials), the real price of the mining product rises even in the absence of a nominal price rise. Gold mining share prices rise as the real price of gold rises.
In the 1929 stock market crash, Homestake Mining (chart below), the representative gold miner of the day, outperformed the DJIA. Also below is the live chart from TradingView for the NYSE:HUI Gold BUGS Index.
In the 1929 stock market crash, Homestake Mining (chart below), the representative gold miner of the day, outperformed the DJIA. Also below is the live chart from TradingView for the NYSE:HUI Gold BUGS Index.
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"The NYSE Arca Gold BUGS Index is a modified equal dollar weighted index of companies involved in gold mining. BUGS: Basket of Unhedged Gold Stocks. Symbol 'HUI'." (Wikipedia)
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