REAL PRICE OF TSX Real Estate & Gold Indexes
Nominal Prices divided by Bank of Canada $CAD Commodity Index
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The chart above shows the "real" price of the TSX real estate index (RE/CCI green dotted plot line) and the "real" price of the TSX gold index (Gold/CCI yellow dotted plot line).
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In October 2018, the CAD$ Commodities Index (CCI blue solid plot line) took another step down after a lengthy rally since 1Q 2016 that had been recently goosed by a weakening Canadian Dollar but now under pressure from the seasonal drop in crude oil pricing. |
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The real price of the TSX Real Estate Index (green dotted plot line) spiked in June 2017 and is now again supported with the seasonal drop in the CCI. The real estate index plot produced a veritable head and shoulders completely detached from its long term trend but is now heading up again with easing commodity prices and CPI back again below the BoC target.
The summer of 2016 rally in the real and nominal prices of gold was followed by a plunge into 1Q 2017 and the plots continue to work on a new base level support. War and the rumours of war as well as headlines out of the Middle East, Russia, Europe, China, North Korea, energy producers, the Fed (interest rates) and the Trump administration produced a slippery wall of worry in 4Q 2017. Anxiety is growing and perhaps renewing the interest in the gold sector again.
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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.
