Gold and silver prices remain under pressure following last week’s sharp selloff, while the Canadian dollar has recovered from its recent weakness, adding another consideration for bullion investors, coin collectors and dealers.
Early trading on Thursday, Oct. 22, placed gold near $5,810 Cdn per troy ounce, while silver was trading around $80.26 Cdn. Both metals remained below their September averages, although prices have fluctuated considerably since the Oct. 14 downturn.
The latest figures follow a sharp decline on Oct. 14, when gold closed at approximately $5,845 Cdn per ounce and silver fell 5.8 per cent to $79.23 Cdn. On U.S. futures markets, gold settled at $4,084.80 US, while silver dropped to $55.55 US.
The selloff followed stronger-than-expected U.S. inflation figures, which increased expectations of higher interest rates. Precious metals generally face pressure when interest rates rise because gold and silver do not generate interest income.
While bullion prices have remained volatile, the Canadian dollar has strengthened against its American counterpart.
According to the Bank of Canada, the loonie was worth 70.11 cents US on Oct. 14. By Oct. 21, it had recovered to 71.14 cents US, an increase of approximately 1.03 US cents in one week. The improvement means Canadians now require approximately $1.41 to purchase one U.S. dollar, compared with $1.43 on Oct. 14.
Reuters reported Wednesday the Canadian dollar was trading near a four-week high, supported by a softer U.S. dollar and growing expectations the Bank of Canada could increase its benchmark interest rate at its Oct. 28 policy announcement. The stronger Canadian dollar has implications for precious metals investors. Because gold and silver are traded internationally in U.S. dollars, an appreciating loonie can reduce their Canadian-dollar value, even when international bullion prices remain relatively stable.
For Canadian collectors, the changing prices directly affect bullion products such as the Royal Canadian Mint’s Gold and Silver Maple Leafs, along with common-date pre-1968 Canadian silver coins whose values are closely tied to their precious metal content. However, collectible coins carrying significant numismatic premiums may be less affected by short-term bullion fluctuations. Condition, scarcity, historical importance and collector demand remain important factors in determining their market value.
Dealers also face changing market conditions as fluctuating bullion prices and exchange rates affect inventory costs, purchasing decisions and retail pricing. A stronger Canadian dollar can reduce the cost of acquiring coins, bullion and collecting supplies from American suppliers, although the benefit depends on exchange rates, premiums and other expenses.
Despite the recent declines, precious metals remain subject to considerable uncertainty as investors monitor inflation, interest-rate expectations and currency movements. For Canadian collectors and dealers, the relationship between bullion prices and the Canadian dollar continues to be an important factor in the market.