Gold Stocks Help the S&P/TSX Composite Hang Tight

All in all, it was a decent day for the Canadian market.

| More on:
The Motley Fool

In the face of a move lower by the U.S. market, the S&P/TSX Composite Index (^GSPTSE) had a relatively good day.  Even though large caps such as Potash, Valeant Pharmaceuticals, and Magna with their respective returns of -3.3%, -2.8%, and -2.5% did their best to set the Canadian market back on this steamy Toronto Tuesday, a decline of just 11.5 points, or -0.09% is all they could muster.

The reason?  Gold stocks were soaring!  Goldcorp (TSX:G) and Barrick Gold (TSX:ABX) were the two biggest contributors on the day with returns of 4.9% and 5.9% respectively.  Also making a solid contribution were Yamana Gold (TSX:YRI) and Kinross (TSX:K), booking gains of 6.7% and 6.0% each.

A move higher by the physical commodity was behind this move by the miners.  However, the spot price only jumped by 0.6%.  This provides an indication of just how beaten up these gold mining stocks have been, and how much torque they have to the upside should the price of gold continue higher.

This was the 6th time in 7 sessions that the price of gold has increased as speculation that the Federal Reserve may forget about its “taking the foot off the monetary stimulus gas pedal” threat from just a few weeks ago gathers momentum.  The market continues to be all Fed, all the time.

Foolish Takeaway

One way or the other, resource stocks consistently have a significant impact on the Canadian market’s performance.  Because of their heavy-weightings in the TSX, these stocks can be harmful for those investors that think they are well-diversified with an index fund or ETF linked to the S&P/TSX Composite Index.

We have prepared a Special FREE Report that will clue you into the perils of investing in this kind of product and suggests an easy to implement alternative strategy.  The report is called “5 Stocks That Should Replace Your Canadian Index Fund”.  One of these 5 just got taken out at a huge premium.  You can find out who the remaining 4 are simply by clicking here.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler is short July 2013 $40 put options on Potash Corp. and July 2013 $32 put options on Goldcorp.  He also owns shares of Potash Corp., Barrick Gold, and Yamana.  The Motley Fool doesn’t own shares in any of the companies mentioned.   

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Woman has an idea
Investing

3 Things About goeasy Stock Every Smart Investor Knows

Here are three things about goeasy stock that every smart investor knows or needs to know.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Dividend Stock Down 30% to Buy Right Now

Keyera is an energy infrastructure company that pays shareholders a forward yield of almost 6%. Is KEY stock a good…

Read more »

oil and natural gas
Dividend Stocks

Suncor Stock Is Rallying: Should You Invest?

Energy stocks like Suncor Energy Inc (TSX:SU) are rising with oil pries.

Read more »

A stock price graph showing growth over time
Investing

3 Growth Stocks That Could More Than Double Their Revenue by 2025

Three outperforming stocks with rising revenues are profitable options for growth investors.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, April 15

TSX investors may want to remain cautious, as any major update related to the ongoing Iran-Israel conflict could increase market…

Read more »

A worker gives a business presentation.
Dividend Stocks

TSX Communications in April 2024: The Best Stocks to Buy Right Now

Here are two of the best TSX communication stocks you can buy in April 2024 and hold for years to…

Read more »

Man holding magnifying glass over a document
Tech Stocks

Watching This 1 Key Metric Could Help You Beat the Stock Market

One key metric that Buffett looks at is the return on equity. Here's why you should watch it.

Read more »

Man considering whether to sell or buy
Dividend Stocks

Royal Bank of Canada Stock: Buy, Sell, or Hold?

Royal Bank of Canada (TSX:RY) has a high dividend yield. Should you buy it?

Read more »