S&P/TSX composite up, gold nears Canadian all-time high

TORONTO — Canada’s main stock index inched slightly higher on the growing shine from metals as the Canadian price of gold moved closer to a record high.

The June gold contract was up $37.30 US at $1,725.80 US an ounce. That’s worth about $2,416 Cdn, just off the all-time high set a few weeks ago.

“So any producer that is mining for gold in Canada is getting prices that they’ve never seen before for their product,” said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

Archibald expects the lustre from gold to continue to glow because of ballooning U.S. deficits. The government and U.S. Federal Reserve are spending trillions of dollars on fiscal and central bank stimulus and House Speaker Nancy Pelosi floated an additional package on Thursday.

“It makes a lot of sense to me to have a reasonably high or reasonable portion of your portfolio in gold as a hedge to future inflation,” he said in an interview.

“We certainly don’t see inflation now. But with the amount of money and stimulus that is being put into the marketplace, I have to believe that we’re going to start to see some level of inflation down the road.”

In addition, unexpectedly strong export numbers out of China buoyed hopes about the economic recovery, which helped copper prices. The July copper contract was up 3.35 cents at $2.38 US a pound.

China reported that exports increased 3.5 per cent last month from a year earlier.

“I always take a grain of salt with all data related to China, but certainly it’s having a bit of a positive impact today,” Archibald said.

The materials sector was up 1.4 per cent on the day with shares of MAG Silver Corp., Oceanagold Corp. and First Quantum Minerals Ltd. up 7.3, 6.9 and 6.2 per cent respectively.

Energy was the big winner, gaining 1.9 per cent with Cenovus Energy Inc. up 6.4 per cent. Enbridge Inc. rose 3.1 per cent after beating expectations despite a higher net loss.

The gains came despite a drop in crude prices.

The July crude contract was down 79 cents at $24.83 US per barrel and the June natural gas contract was down five cents at $1.89 US per mmBTU.

Crude prices surged as much as 10 per cent following reports that Saudi Arabia was selling its oil at significantly higher prices than in the previous two months.

Health care fell 2.5 per cent as Bausch Health Companies Inc. lost 8.6 per cent on a weak quarterly report and reduced guidance.

Industrials was hurt from a 15.1 per cent drop in Bombardier Inc. after poor quarterly results.

Overall, the S&P/TSX composite index closed up 2.95 points at 14833.69 after hitting an intraday high of 15016.03.

In New York, the Dow Jones industrial average was up 211.25 points at 23875.89. The S&P 500 index was up 32.77 points at 2881.19, while the Nasdaq composite was up 125.27 points at 8979.66.

U.S. markets benefited as COVID-19 was receding in parts of the country and economies were reopening in many parts of the world, said Archibald.

Another factor is the pressure investors with loads of cash are feeling to get back into the market as it continues to recover from the large selloff.

“This is the FOMO — or the fear of missing out — effect in the marketplace, which is really dominating with day after day of fairly positive returns.”

The Canadian dollar traded for 71.35 cents US compared with an average of 70.80 cents US on Wednesday.

American markets increased despite growing jobless benefit claims last week that raised the total to 33.5 million workers.

Despite the massive weekly numbers, the stock market has increased with every release of data as the information is minimized because it is backward-looking and everyone knows the statistics will be massive, Archibald said.