TORONTO — Falling gold and copper prices led the Canadian dollar lower Thursday, however gains in the financial, industrial and health care sectors saved Canada’s main stock index from a heavy drop.
The downward pressure on gold stocks came as a strengthening U.S. economy suggests the possibility of a rate hike, said Anish Chopra, managing director with Portfolio Management Corp.
“Part of it is from the fact that people use gold as an inflation hedge, and if you look at what’s happened in the US labour market from the numbers we saw this morning, the job market in the U.S. is quite strong,” said Chopra. “If that causes the Federal Reserve to reduce their stimulus and taper their bond-buying program, or increase rates in the future, investors don’t need to go as much into gold.”
The August gold contract was down US$36.60 at US$1,873.30 an ounce and the July copper contract was down 13 cents at US$4.46 a pound.
There was also a slight dip in the July crude oil contract, which was down two cents at US$68.81 per barrel. The July natural gas contract was also down, with a drop of 3.4 cents bringing it to US$3.04 per mmBTU.
All that led to a drop in the Canadian dollar, which traded for 82.62 cents US compared with 82.97 cents US on Wednesday.
Meanwhile, the TSX reached a midday high above 20,000 points for a third day in a row, but was unable to hold onto the gains and closed down 29.76 points at 19,941.39.
Financial stocks were a bright spot with a gain of .43 per cent to 373.10 points for the sector. Companies like Cannacord Genuity Group Inc. and Intact Financial Corp. led the gains with rises of 6.1 per cent and 3.3 per cent, respectively.
U.S. markets also had a mixed day before closing lower, with the Dow Jones industrial average down 23.34 points at 34,577.04. The S&P 500 index was down 15.27 points at 4,192.85, while the Nasdaq composite was down 141.82 points at 13,614.51.
Chopra said markets moved up and down throughout the day as markets balanced the positive of strong job numbers with negative speculation around possible increases in inflation and a drop in federal stimulus for markets.
“Private payroll numbers for May are pointing towards a strong job market in the US, so what you have is a strong jobs backdrop to the market,” said Chopra. “With that there’s the potential for inflation, and you saw the movement in the market down in the morning but it’s recovered since then.”
A report by payroll company ADP on Thursday found private sector employment in the US increased by 978,000 jobs from April to May.
This report by The Canadian Press was first published June 3, 2021.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
The Canadian Press