4 LEXPERT
|
2017/18
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WWW.LEXPERT.CA
EXCEPT FOR THE ODD moment here and
there, the Midas Touch has been missing in action
from the gold market for the past five years. But
guess what? Aer watching prices slide sideways
or slip downward along with most other mining
stocks during the long dry spell — when raising
money for gold companies is described by Frank
Mariage of Fasken Martineau DuMoulin LLP as
"an extreme sport" — investor appetite for gold is
quietly rebounding.
ere are a few different reasons for the re-
newed demand, but one that keeps coming up
is the US dollar. Seen as the global reserve cur-
rency and a safe haven since World War II, that
view has slowly been eroding. In recent months,
geopolitical tensions have ratcheted up while US
consumer spending has come in below expecta-
tions — suggesting the American economy is not
as strong as the market had been pricing in. Gold
and the US dollar move in opposite directions. So
any pressure on the US dollar makes gold more
expensive for Americans but cheaper for foreign
investors to buy — an attractive combination for
investors looking to hedge their US-denominat-
ed investments.
Sander Grieve, a partner at Bennett Jones
LLP in Toronto, says day-to-day fluctuations in
the price of gold have been considerable, "and it
almost seems right now to be more a barometer
of the US administration than anything else." In
other words, the Trump effect. "Anyone who lacks
confidence in the US dollar, even if they believe in-
flation's coming at some point, and wants to hold
something that's not exposed to dollars, will say,
'I need some exposure to gold.' So gold's certainly
alive as a hedge on the US currency," Grieve says.
e climb in the price of gold has started to
translate into a "more normal market" from a law
firm perspective, he says — one in which there are
financings, M&A activity. ere have even been a
GOLD MARKETS
GOLDEN
OPPORTUNITY
GEOPOLITICAL
UNCERTAINTY HAS
GIVEN A BOOST TO
GOLD MARKETS AND
CANADIAN MINERS.
EXPLORATION
WORK AND FINANC-
INGS ARE BACK ON
THE TABLE, AND
FOREIGN INVESTORS
ARE TAKING NOTICE
BY SANDRA RUBIN
PHOTO:
SHUTTERSTOCK
