"...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 $CAD Commodity Index
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The chart above shows the "real" price of the TSX real estate index (RE/CCI green dotted plot line) and the "real" price of the TSX gold index (Gold/CCI yellow dotted plot line). July 2019, StatsCan revised their data set on the CCI metric and produced a new peak at July 2005 which I have labelled.
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In February 2020, the CAD$ Commodities Index (CCI blue solid plot line) continued the downtrend. In July 2019, StatsCan revised their data set on this metric and produced a new peak at July 2005 (Hurricane Katrina) above the July 2008 WTI price peak and since those peaks, the trend is lower highs. The downtrend accelerated with the 4Q 2014 crash in crude oil prices and by 1Q 2016, gold and real estate buyers went long. |
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Since April 2013 nominal real estate prices have indeed been the gold standard with the divergence widening relative to nominal gold (solid plots); that divergence is beginning to narrow as gold buyers bid prices up for a breakout above the 2016 peak.
The heat of the 2014-2017 FOMO frenzy is in the history books but the real estate markets are still on with fresh buying in central Canada especially in Ottawa and Montreal where they have set new single family detached price highs and in Toronto where peak strata prices are presently unconstrained.
Both the nominal and real gold plots are ticking up even as global demand for the USD continues. Looking at next month's unfolding data, the rising USD:CAD ratio will be dampening enthusiasm for precious metals and other commodities. The door to deflation has been opened by a two-fisted crude crash and a viral contagion.
The heat of the 2014-2017 FOMO frenzy is in the history books but the real estate markets are still on with fresh buying in central Canada especially in Ottawa and Montreal where they have set new single family detached price highs and in Toronto where peak strata prices are presently unconstrained.
Both the nominal and real gold plots are ticking up even as global demand for the USD continues. Looking at next month's unfolding data, the rising USD:CAD ratio will be dampening enthusiasm for precious metals and other commodities. The door to deflation has been opened by a two-fisted crude crash and a viral contagion.
CLICK CHART TO ENLARGE
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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. In the 1929 stock market crash, Homestake Mining, the representative gold miner of the day, outperformed the DJIA. |
