John Morrissy, Financial Post
OTTAWA - Gold, oil and the Canadian dollar shot out of the gate Monday as the plunging U.S. dollar and the prospect of continuing low interest rates sent investors searching for high-return assets.
"Money is fleeing the U.S.," said commodity analyst Dennis Gartman.
"Capital is concerned about rising inflationary pressures that emanate from both the changes in Washington and the Federal Reserve policies, and money is simply finding its way away from the U.S. dollar. That's been beneficial to gold."
Gold punched to new historic highs, breaching the $1,100 mark to trade up $5.70 to US$1,101.40 an ounce.
The Canadian dollar soared 1.57 cents to 94.57 cents US, while oil gained $2 a barrel to trade at US$79.43 a barrel.
Meanwhile, the U.S. greenback was off more than a full percent from its Friday close, as measured by the U.S. dollar index, which measures the greenback against a basket of six major world currencies. It has plunged almost 16% since early March.
Market watchers credited the move to comments made at the G20 meeting over the weekend in Scotland, at which finance ministers and central bankers said the world is still too dependent on low interest rates and stimulus dollars to pull the plug on those economic life supports.
Shaun Osborne, chief currency strategist at TD Securities, said high U.S. unemployment - climbing Friday above 10% for the first time since 1983 - also brought investors back to the "risk" trades of stocks, commodities and currencies.
"With the unemployment rate will pushing higher . . . it's going to be a very long time before the Fed (U.S. Federal Reserve) can think about tightening monetary policies. So that's encouraging from a risk point of view."
A plunging U.S. dollar, however, is less encouraging for Canadian manufacturers and exporters who must cope with the resulting high Canadian dollar, and for Bank of Canada governor Mark Carney, who recently made several speeches trying to talk down the loonie.
There's little Mr. Carney can do, Mr. Osborne said.
"They are not going to come in and intervene directly in the currency markets. It's potentially very expensive, there's no guarantee of success, and it's an unwinnable battle for the Bank of Canada to act in isolation against a generally weak U.S. dollar trend.
"The currency may be stronger than the bank would prefer, but we still think that fundamentally the Canadian dollar is not overvalued."
The commodity-laced Toronto Stock Exchange joined in the party on Monday - as did stock markets around the world - advancing 236.46 points, to 11,486.88, less than 100 points off its Sept. 22 year high of 11,585.73.
Despite the fact that markets have soared 60% since March, there's still room to go higher, said BMO Capital Markets economist Robert Kavcic.
"This is by far the best spot in the economic cycle for equities - when you go from recession to recovery.
"Similarly, when you're looking at changes in Fed interest rates, the best part of the cycle for equity markets is when the Fed is on hold and in the first third of the tightening cycle.
"If the recovery continues to play out as forecast, stocks should grind higher still."
"Money is fleeing the U.S.," said commodity analyst Dennis Gartman.
"Capital is concerned about rising inflationary pressures that emanate from both the changes in Washington and the Federal Reserve policies, and money is simply finding its way away from the U.S. dollar. That's been beneficial to gold."
Gold punched to new historic highs, breaching the $1,100 mark to trade up $5.70 to US$1,101.40 an ounce.
The Canadian dollar soared 1.57 cents to 94.57 cents US, while oil gained $2 a barrel to trade at US$79.43 a barrel.
Meanwhile, the U.S. greenback was off more than a full percent from its Friday close, as measured by the U.S. dollar index, which measures the greenback against a basket of six major world currencies. It has plunged almost 16% since early March.
Market watchers credited the move to comments made at the G20 meeting over the weekend in Scotland, at which finance ministers and central bankers said the world is still too dependent on low interest rates and stimulus dollars to pull the plug on those economic life supports.
Shaun Osborne, chief currency strategist at TD Securities, said high U.S. unemployment - climbing Friday above 10% for the first time since 1983 - also brought investors back to the "risk" trades of stocks, commodities and currencies.
"With the unemployment rate will pushing higher . . . it's going to be a very long time before the Fed (U.S. Federal Reserve) can think about tightening monetary policies. So that's encouraging from a risk point of view."
A plunging U.S. dollar, however, is less encouraging for Canadian manufacturers and exporters who must cope with the resulting high Canadian dollar, and for Bank of Canada governor Mark Carney, who recently made several speeches trying to talk down the loonie.
There's little Mr. Carney can do, Mr. Osborne said.
"They are not going to come in and intervene directly in the currency markets. It's potentially very expensive, there's no guarantee of success, and it's an unwinnable battle for the Bank of Canada to act in isolation against a generally weak U.S. dollar trend.
"The currency may be stronger than the bank would prefer, but we still think that fundamentally the Canadian dollar is not overvalued."
The commodity-laced Toronto Stock Exchange joined in the party on Monday - as did stock markets around the world - advancing 236.46 points, to 11,486.88, less than 100 points off its Sept. 22 year high of 11,585.73.
Despite the fact that markets have soared 60% since March, there's still room to go higher, said BMO Capital Markets economist Robert Kavcic.
"This is by far the best spot in the economic cycle for equities - when you go from recession to recovery.
"Similarly, when you're looking at changes in Fed interest rates, the best part of the cycle for equity markets is when the Fed is on hold and in the first third of the tightening cycle.
"If the recovery continues to play out as forecast, stocks should grind higher still."
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