Market Updates

There can be rallies in the street and turmoil surrounding government buildings, but plain and simple, when the numbers don’t add up the options are extremely limited.

We have been so preoccupied by the return of the US markets that we have failed to notice how far behind our own TSX truly is.

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”-Chuck Prince, former CEO of Citibank (July, 2007)

Over the past week we witnessed both Moody’s downgrade the sovereign debt of Great Britain, and Fitch issuing warning on debt and lack of budget and entitlement reform in the United States.

The release of January’s FOMC minutes had a fairly substantial impact on precious metals this week as on Wednesday alone we witnessed more than a 2 percent sell off in the price of gold.

The word “war” perhaps over-hypes the implications of these policies. None the less, measures to spur domestic growth have direct implications on a country’s exchange rate, and thus are much more far-reaching.

Canadians are overleveraged. We are holding to much debt. Why then, when there are present opportunities to relieve household imbalances are we balking at the opportunity to prosper as a nation?

The Canadian dollar against its US counterpart had a very narrow trading range over the last few months. Not this week, as the loonie fall over a cent and a half and finished trading at close to 99 cents.

News surfaced this week that the Bundesbank, Germany’s central bank, was recalling gold that it holds outside of the country. But does it matter where Germany really stores their gold?

The debt ceiling has been raised on 78 separate occasions since 1960, and pursuing alternative measures to avoid exhausting the US Treasury’s coffers will ultimately shock both creditors and rating agencies.

The price of gold has moved up significantly in response to the US central bank’s issuance of cheap credit, but the question then becomes what happens to the price of gold when the Fed takes the punch bowl away?

What is the real significance of America actually diving over this fiscal cliff?

Stock markets seem to be carrying a false sense of optimism that economic growth is stronger than it actually is. The economic data, however, tells a story that is quite contrary.

Does the moderate growth of the Canadian economy carry any implications for interest rates in the upcoming year?

Can commodity based currencies be looked to for their stability?

Beyond potential returns that gold bring, the uncertainty in global markets still makes exposure to gold as favorable as ever.