The TSX Venture Index touched a high of 790.63 today, marking a new 1-year high for the exchange. Now, the Venture is within striking distance of the 5-year high of 895.71 it hit in January 2018. While the index still has plenty of ground to cover before it surpasses its 5-year high, near-term catalysts in the gold sector could give the exchange the momentum it needs to do so…
After falling as low as US$1,777.38 for the month of November, the price of gold has rebounded to US$1,871.28. Though the Venture has shown surprising resilience in the face of volatile gold prices this year, gold remains the lifeblood of the junior exchange.
As we wrote in a Weekly Intelligence Newsletter titled, “The Meteoric Return of the TSX Venture Index,”
“No exchange benefits from a gold bull market like the TSX Venture. More than half of its issuers call the resource sector home (mainly exploration and mining).”
Although gold has traded below its August highs for months now, investors are speculating the yellow metal won’t remain rangebound much longer.
“’While fragile lower range-bound trading is likely in the near term, beyond near-term corrections, a weaker USD, negative real rates, concerns surrounding inflation, and expectations of further fiscal stimulus amid accommodative monetary policy are likely to keep gold price risk skewed to the upside,’ [Standard Chartered precious metals analyst Suki Cooper] wrote.”
Another potential catalyst besides fiscal and monetary policy is the strong financing activity seen on the TSX Venture in November. According to data provided by the TMX Group, total financing activity on the Venture increased approximately 81% year-over-year from ~224 million in November 2019 to ~$406 million in November 2020. For context, ~$500 million was raised on the Venture in November 2017 — two months before the exchange reached its aforementioned 5-year high.
2021 Could Be a Big Year for TSX Venture Investors
With loose monetary policy, negative interest rates, and hundreds of billions in stimulus forthcoming, the gold sector has key economic trends working in its favour. This could propel the price of gold, and by extent the TSX Venture, to new highs in 2021 — especially if global debt levels remain elevated.