Gold dives 3 per cent; TSX, Wall Street all see red with broad declines

TORONTO – The price of bullion nosedived on Tuesday, as the gold sector weighed down the Toronto stock market with a three-digit loss, while U.S. indexes also ended in the red.

The S&P/TSX composite index pulled back 168.03 points, or 1.14 per cent, at 14,521.01, dragged down by bullion and materials stocks.

Nearly all sectors on the Toronto market recorded losses, except for information technology and health care, with the gold sector recording the biggest decline by losing a whopping 9.3 per cent. Materials stocks, which also include precious and base metals miners and fertilizer companies, pulled back 6.72 per cent.

The December gold contract plunged $43 to US$1,269.70 an ounce — the lowest price it’s been since late June.

Capital markets analyst John Stephenson says the slump in gold prices can be blamed on a rising U.S. dollar, and growing likelihood that the U.S. Federal Reserve will raise interest rates in December. Higher rates diminish the appeal of gold, which investors tend to favour when they fear that low rates will encourage inflation.

“Valuations are high; central banks have essentially provided easy money policies for far too long. There are question marks in the marketplace about whether that will continue,” said Stephenson, chief executive at Stephenson & Co. Capital Management.

“Markets are very uncertain in any bit of news, especially if it revolves around the Fed and rates. It’s going to be reacted to, overreacted to, by the market.”

Pessimism in equities is also attributed to concerns over the British exit from the European Union, which is now viewed as a “hard exit.”

“Many people didn’t think until (British Prime Minister ) Theresa May spoke that the government was going to negotiate to leave the European Union in a very definitive way,” he noted.

“They thought it was going to be a softer exit, if you will. It’s clearly being a harder exit and people worry about the repercussions of that.”

On Wall Street, the Dow Jones industrial average was down 85.40 points at 18,168.45, while the broader S&P 500 composite index fell 10.71 points to 2,150.49. The technology-heavy Nasdaq composite faded 11.21 points to 5,289.66.

The Canadian dollar lost 0.49 of a cent to 75.79 cents US as the International Monetary Fund lowered its estimates for Canadian growth in 2016 and 2017, partly due to being negatively impacted by unexpected weakness in the United States — the world’s largest economy and a major market for Canadian goods and services.

Commodity prices were mixed, with the November crude contract pulling back 12 cents at US$48.69 per barrel, November natural gas adding four cents to US$2.96 per mmBTU, and December copper contracts dipping three cents to US$2.17 a pound.

— With files from The Associated Press

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Note to readers: This is a corrected story. A previous version had an incorrect closing figure for the S&P/TSX