In face of stock market losses, investors flock to safety of gold

TORONTO – Investors flocked to the safety of gold stocks Monday as the Toronto stock market closed sharply lower, pulled down by weakness in the energy and financial sectors.

The S&P/TSX composite index fell 228.59 points to end the day at 12,535.40.

But those losses were mitigated by the gold sector, which was the biggest gainer on the TSX, rising 4.25 per cent. The price of April gold soared $40.20 to close at US$1,197.90 a troy ounce.

Craig Fehr, a Canadian market strategist at Edward Jones in St. Louis, said past declines in the TSX have been brought on by volatile commodity prices, but the gains in bullion helped offset that Monday.

“Gold has been the ball and chain around the TSX’s ankle for some time,” said Fehr.

“We’re actually seeing the rebound in gold today, and in recent weeks, offer a little help to the domestic market.”

Fehr said investors are looking to gold, as other driving forces in the market such as concerns over global growth, falling oil prices and dismal corporate earnings reports continue to remain unpredictable.

“The rebound we’re seeing in gold is more of a safe haven play by investors,” said Fehr, adding that this has also helped boost the sale of Canadian and U.S. treasury bonds in recent months.

In other commodities, the March contract for benchmark crude oil fell below US$30 a barrel again as it lost $1.20 to end at US$29.69.

March natural gas added 7.7 cents to US$2.14 per mmBtu while March copper dipped 1.25 cents to US$2.09 a pound.

The Canadian dollar continued its struggles, off 0.13 of a U.S. cent to 71.77 cents US.

In New York, major indexes also took a beating for a second consecutive session, with major losses in the financial and technology sectors.

The Dow Jones industrial average fell 177.92 points to 16,027.05 after having shed more than 200 points on Friday. The broader S&P 500 was off 26.61 points at 1,853.44 while the tech-dominated Nasdaq composite index declined 79.39 points to 4,283.75. The Nasdaq is down nearly 20 per cent from its record high last year.

“Volatility has certainly become the new normal and today is a good example of that,” added Fehr.

A number of factors have contributed to the selling on markets since the beginning of the year, including the economic slowdown in China, along with concerns about the strength of the recovery in the United States.

The losses in North America came on the heels of big drops in Europe, where Germany’s DAX fell 3.3 per cent, France’s CAC 40 lost 3.2 per cent and Britain’s FTSE 100 gave back 2.7 per cent.

Japan’s benchmark Nikkei 225 rose 1.1 per cent, but elsewhere in Asia many markets were closed for the Lunar New Year holidays.

Follow @LindaNguyenTO on Twitter.