A Glimmer in Toronto’s Eye

It looks as though Michael’s not the only gold bug crawling the Street these days. Resource stock buyers late last week helped contribute to the Toronto Stock Exchange’s bounce above the 10,000 mark for the first time since October 2000.

Barrick Gold, Canada’s fourth largest gold miner, rose $1.02, on news that its new mine in Peru is starting production early. The mine discovery has been described as the “largest greenfields discovery for the gold industry in the last decade.”

Other gold producers saw strong gains too, as did producers of other raw materials and natural resources, including energy.

Senior Financial Markets Economist at Scotiabank Mark Chandler said, “There are investors right now that are saying that they don’t want to put all their eggs in the housing market and may be returning to stocks.” Wow! All I can say on that is that these savvy investors must have been reading PROFIT CONFIDENTIAL.

“Canada is now being viewed internationally as a storehouse of wealth, and that’s what we’re seeing reflected in the markets,” commented Scotiabank’s VP Aron Gampel.

The Toronto Stock Exchange is up 8.6% overall this year, while the TSX Energy Sector is up a whopping 25% year to date. The Canadian dollar also continued to pick up steam late last week.

The recent strength of Canadian stocks and Canadian currency is great news for investors, but consumers are likely to feel a pinch when interest rates inevitably start to rise.

In Bank of Canada (BOC) Governor David Dodge’s speech to the Winnipeg Chamber of Commerce last Wednesday, he explained that when “demand for goods and services pushes the Canadian economy against the limits of its capacity, and inflation is poised to rise above the target, the Bank will raise interest rates to cool off the economy.”

Although the BOC decided to leave the overnight interest rate at 2.5% at its late-May policy meeting, most economists are expecting to see the Canadian benchmark rate start moving up in the fall. The next meeting is set for July 12, 2005.

In the meantime, investors with a sparkle in their eye will continue to enjoy the rewards of the golden opportunities on the Toronto Stock Exchange.