Higher crude and gold prices alongside Canada’s newly announced stimulus package saw the Toronto Stock Exchange’s S&P/TSX composite index rise 29.68 points, or 0.24%, at 12,600.76 at 10:07 a.m. ET (14:07 GMT).
The TSX reacted similarly to other equity markets following news of a $2 trillion package approved by U.S. politicians to alleviate the economic impact of the virus outbreak. Now, Canadian legislators are the latest to approve a CAD27 billion ($18.8 billion) stimulus bill to help people and businesses deal with the coronavirus pandemic.
Canada, which is a big exporter of commodities such as oil and gold, has been affected by the volatility of the prices of metals and crude. The main index has lost about 30% from its record closing high hit in February.
However, the stability of gold prices well as the proposed stimulus bill has been able to offset some of the losses from declining crude. Gold prices had their best day in more than a decade as investors turned to the traditional safe haven. The April gold contract was up US$83 at US$1,567.60 an ounce and the May copper contract was down 7.1 cents at US$2.10 a pound.
The key materials sector gained 5.4 per cent as Semafo Inc. was up more than 32 per cent on a deal to combine with junior miners Endeavour Mining Corp.'s West African gold mining operations. Silvercorp Metals Inc. was up 31.6 per cent.
Gold prices managed to bounce back from falling below the $1,500 threshold earlier this month when some investors sold precious metals to meet margin calls during the worst market rout in more than a decade. Others sold to buy assets such as the dollar. However, continued interest for bullion saw buyers returning to the market this week on the back of aggressive stimulus measures that reduced pressure on funding.
As gold gained nearly 8% at the start of this week to trade near $1,617 an ounce, Goldman Sachs Group Inc. commented that bullion is probably at an inflection point and it’s time to buy. As the majority of bullion dealers and gold refineries are currently closed due to the pandemic, it’s getting harder to find physical gold. The supply chain is getting tighter and tighter similar to the events following 9/11.
With gold prices fluctuating wildly right now and bullion being almost impossible to get, a great number of institutional and private buyers are turning to gold stocks instead. Egyptian billionaire Naguib Sawiris said this week that he’s raising his stakes in gold mining companies and veteran investor Mark Mobius noted this is not the time to sell the metal.