Canada’s main stock index rose to a record high on Thursday, largely due to gains from the materials sector. The materials group, including precious and base metal miners, added 0.6 percent. Gold was up 0.3% at 1,458.1 an ounce, which led to an increase in value of gold stocks as well.
The Toronto Stock Exchange’s S&P/TSX composite index rose 13.95 points, or 0.1%, to 17,114.52. It was the fourth straight session that the index notched a record close.
The price of gold is down US$100 per share since hitting its 2019 high in September. Its current price of US$1,450 is still up more than US$200 per ounce compared to this time last year. As a result, investors are increasingly turning to the yellow metal as well as adding gold miners to their buy lists.
Financial analysts predict a round of profit taking is to be expected in light of the rally that occurred over the summer months. Gold traded below US$1,300 near the end of May before taking off and eventually hitting US$1,560 a mere three months later.
The recent pullback of the market hasn’t affected gold miners and the market conditions that drove gold higher remain in place. Following a few difficult years for gold, large and junior gold miners have since cleaned their balance sheets. A round of consolidations and strategic asset acquisitions are strengthening their presence and market capitalization.
News of the Newmont Goldcorp Corporation NEM’s sale of its Red Lake Complex in Ontario, Canada, to Evolution Mining Limited contributed to the Canadian miner’s gold shares rising16.3% in the past year compared. The gold industry, as a whole, registered a 52.1% growth. The transaction, which is anticipated to close in the first quarter of 2020, strengthens the company’s balance sheet, streamlines its assets base and provides continued exposure to resource discoveries in the Red Lake District.
The latest deal in a raft of gold sector consolidation also added a third major asset to Kirkland Lake Gold Ltd.'s portfolio, adding annual production of around 600,000 ounces when the gold miner agreed to buy smaller rival Detour Gold Corp (DGC.TO) in an all-stock deal.
Such major deals in addition to several Eastern European countries relocating some of their gold reserves from the UK are the drivers behind the upward trajectory of the yellow metal.
While the market continues to be divided ahead of the trade deal between the United States and China, the upcoming months are likely to put added pressure on the price of gold due to a perceived drop in global recession risks. This can’t be ruled out in the coming months, although industry leaders retain a positive outlook. At this point, any major economic blow-up could send gold and the gold miners’ share prices significantly higher before the year’s end.