Toronto Stock Exchange, June 17-21

The strong run that equity markets had been enjoying for much of the year came to an end during the period, and the S&P/TSX Composite Index did not escape the global market trend. The index was off 255 points to 11,955.66 points for the period, and was still falling at press time. 

The turn south began with the U.S. Federal Reserve announcing that it might cut back on its quantitative easing (QE) program later this year. The downward trajectory deepened when data out of China put its economic recovery in doubt. Adding to investor fears was a spike in the Chinese interbank lending rate to over 13%, which many investors believe could crimp growth. 

With the QE possibly ending and interest rates rising in the U.S., the U.S. dollar gained ground, which in turn hurt commodity prices. A stronger dollar makes U.S.-denominated commodities more expensive for foreign buyers by cutting demand, and also lessens the threat of inflation, undermining the inflation-hedge argument for holding metals. 

Such factors, along with increased margin requirements on gold future contracts, helped push the price of the yellow metal down US$98 to US$1,292 per oz. The lower price hurt miners, and the S&P/TSX Global Gold Index fell 19 points to 171.05 points.

Adding to the fall was a new report from Goldman Sachs that predicts a gold price of just US$1,050 per oz. by the end of next year. 

With so many dark clouds gathering over the once-glimmering gold sector, the world’s leading producer, Barrick Gold, said it was being forced to cut a third of its staff at its headquarters in Toronto. Barrick shares were off $2.13 to $17.71 for the period. 

The diversified miners didn’t fare much better, as the Capped Metals & Mining Index was off 58 points to 708.59, and the price of copper fell 10¢ to US$3.10 per lb. 

One bright spot for the period was MBAC Fertilizer. The company saw its share price increase by 25% to finish at $2.08. The upswing came a week after announcing it was starting up operations at its Itafos Arraias single super phosphate project in Brazil. MBAC says construction is on time and on budget, and that it expects to produce in July, and ramp up to mill capacity by October. 

Gran Colombia Gold, however, was moving in the opposite direction. The company with world-class gold assets in Colombia saw its market capitalization fall by 47%, and its share price finish the period at $2.19. The slide began after it executed a 1-for-25 reverse split and got worse after it was removed from the Market Vectors Global Junior Gold Miners Index. The company was cut from the index after its market cap fell below the minimum market capitalization of $75 million.

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