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One of the places the decline in the Canadian dollar is most evident is in
our grocery stores.
The University of Guelph's Food Institute estimates the average
Canadian household spent an additional $325 on food in 2015 with meat rising
5% and fruit and vegetable prices rising between 9.1-10.1%.
Consumers should expect an additional annual increase of about $345 in
2016 with meat expected to increase up to 4.5%, fish/seafood rising up to 3%
and dairy, eggs and grain rising 2%.
 
The Bank of Canada is playing its role in killing the Cdn$, talking about
negative interest rates as if the two rate cuts in 2015 weren’t enough.
Budget deficits, possibly as high as $25B and American style QE are coming
from Canada’s Federal Liberal governing party. All this is a bid to
strengthen our economy.
U.S. dollar strength is a major factor in a lower loonie…
Our dollar is certainly weaker then the US$, far from the parity it
enjoyed so recently.
El-Nino caused flooding has contributed to supply shortages and price
increases on produce from both California and Mexico.
But a weaker currency should be good news for us Canucks right? After all,
when our currency is weak exports to our southern colossus neighbor, and
others, should strengthen. At least that’s current government think.
Yeaaahhhh…no. We never were strong on manufacturing and having lost 10,000
factories we’re weaker than ever in that sector. We’ve even allowed food
processing to be moved offshore. We produce the wheat, offshore our food
processing, end up paying through the nose when our currency weakens.
We live in a northern climate, long winters and short growing seasons take
their toll on our food costs – i.e. Canada imports over 80% of its fruit and
vegetables. We don’t manufacture much of what we want/need so a weak currency
means all the things we import get more expensive. We do of course have a lot
of oil and natural gas and precious and base metals. The companies who dig,
saw and pump to find the world’s resources have huge problems of their own.
Corporate Canada’s resource sector is in the gun sights of Moody’s
Investors Service. The service is looking to downgrade a sizeable chunk of
energy and mining company corporate debt worldwide. Below is their reasoning.
Moody’s scaled back its projections for oil prices saying…
“Iran is poised to add more than 500,000 barrels per day to global
supply while OPEC and many non-OPEC producers continue to produce without
restraint as they battle for market share. Lower oil prices will further
weaken cash flows for E&P companies and the upstream portion of
integrated oil and gas companies. This will cause further deterioration in
financial ratios, including deeper negative free cash flow. Most companies
are unable to internally fund sustaining levels of capital spending at
currency market prices.”
Moody’s senior analyst Jamie Koutsoukis says…
“Slowing growth in China, which consumes and produces at least half of
base metals, and is a material player in the precious metals, iron ore and
metallurgical coal markets is weakening demand for these commodities and
driving prices to multiyear lows.”
Many, many years ago during a lengthy argument with a friend he told me to
‘give it a doubt’ – he meant I was wrong.
Jamie needs to give it a big doubt regarding:
- China’s precious metal demand.
- Precious/base metal historical pricing, at least in Cdn
dollar’s.
In China, physical delivery from the Shanghai Gold Exchange reached a
record 2,596 tonnes, or 80% of total global gold mine output for 2015.
The People’s Bank of China bought 19 more tonnes in December, bringing the
total amount the bank purchased to over 1,762 tonnes in 2015.
Chinese love their gold and silver. They buy it to protect their wealth.
They know fiat currency, paper money, can go to zero. They know gold can’t.
As for precious metal pricing today in Canadian dollars let’s check:
Gold - US$1,098.60 = CDN$1,564.74
Remember when the Canadian dollar was at par with the American dollar in
the spring of 2013? Gold was US/Cdn$1,594.80 in March of 2013. Since then the
Loonie has lost 30%. Gold might be in a bear market in U.S. dollars but it’s
not in a bear market in Canada.
Conclusion
High food pricing is killing the benefits of low energy prices for
Canadian consumers.
Owning gold would have saved Canadians a lot of financial destruction. The
Chinese, Asians, have known this for thousands of years. We use to as well,
maybe for not as long but oh yeah we knew. Today there’s a whole generation
who grew up thinking of gold as a relic from their grandfathers day. Was a
lesson learned?
Is the Cdn$ set to drop further? I’ve got its future direction, lessons,
and gold ownership, on my radar screen. Do you?
If not, maybe you should.
Richard lives with his family on a 160 acre ranch in northern British
Columbia. He invests in the resource and biotechnology/pharmaceutical sectors
and is the owner of Aheadoftheherd.com. His articles have been published on
over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette,
VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews,
Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire,
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Mining Analysts.
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Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or
the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources
he believes to be reliable but which has not been independently verified.
Richard Mills makes no guarantee, representation or warranty and accepts
no responsibility or liability as to its accuracy or completeness.
Expressions of opinion are those of Richard Mills only and are subject to
change without notice. Richard Mills assumes no warranty, liability or
guarantee for the current relevance, correctness or completeness of any
information provided within this Report and will not be held liable for the
consequence of reliance upon any opinion or statement contained herein or any
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