Loonie shifts from oil to gold: NBF

Despite an easing in oil prices, the Canadian dollar is still heading higher, which reflects the fact that the loonie is increasingly tied to the price of gold, rather than energy, says National Bank Financial Inc. (NBF).

In a research note, NBF analysts point out that the Canadian dollar hasn’t been trading in line with oil prices in recent months.

Indeed, “the rolling correlation between daily moves in the loonie, measured as US dollar per Canadian dollar, and [prices for West Texas Intermediate crude oil] has turned negative in recent months,” it said, “a clear break from the strongly positive relationship that prevailed during the previous oil shock in 2022.”

At the same time, the loonie’s correlation with the price of gold “has strengthened sharply,” NBF said.

“The loonie’s resilience is therefore not a contradiction but a rotation in its commodity anchor,” the note said.

“Oil still matters for Canada, but in the current market configuration, gold appears to be the more relevant marginal driver, helping explain why [the loonie] is appreciating even as crude retreats,” it added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.