Canadian Stocks Rise as Gold Futures Rebound

Strategic Insights -

Canadian stocks edged up for the first time in three days, with a weekly gain, as investors seized the opportunity to add to their holdings in the gold industry. The rally came as gold futures rebounded in after-market trading, lifting gold-mining companies such as Goldcorp Inc. and Barrick Gold Corp. Meanwhile, Canadian Natural Resources Ltd., the country's second-largest energy company by market value, dropped 1.2 percent as oil prices closed below $72 a barrel for the first time this year.

Key Takeaways:

  • The S&P/TSX Composite Index increased 94.36 points, or 0.9 percent, to 11,223.12, marking its first weekly gain since January 8.
  • Commodity-linked companies, which represent 45 percent of Canadian stocks by market value, have tumbled 8.8 percent this year due to the strengthening US dollar.
  • The Reuters/Jefferies CRB Index of commodities has declined 8.8 percent this year as concerns over budget deficits in European countries have boosted the US dollar.
  • Analyst Steven Butler of Canaccord Financial Inc. noted that gold-mining companies, such as Goldcorp and Barrick Gold, are now available at a discount, undervalued by 10-15 percent relative to the price of the metal itself.
  • GMP Capital Inc. analyst Craig West expects to see more gains in the coming month as gold investors turn towards larger, more diversified, and less risky senior gold stocks.
  • Goldcorp jumped 7.3 percent, its largest increase in five months, to C$38.19, while Barrick Gold climbed 5.5 percent to C$38.45.

Statistics:

  • The S&P/TSX Composite Index gained 94.36 points, or 0.9 percent, to 11,223.12.
  • Commodity-linked companies represent 45 percent of Canadian stocks by market value.
  • The Reuters/Jefferies CRB Index of commodities has declined 8.8 percent this year.
  • Gold prices are currently trading at a level where gold-mining stocks are undervalued by 10-15 percent, according to analyst Steven Butler.
  • Goldcorp's stock price increased by 7.3 percent, its largest gain in five months.

Sources:

  • Reuters/Jefferies CRB Index
  • S&P/TSX Composite Index
  • Euclid Infotech Pvt. Ltd.
  • Avenue Investment Management
  • GMP Capital Inc.
  • Canaccord Financial Inc.
  • Cormark Securities Inc.
  • Eurozone news outlets regarding Greece's fiscal situation