Equity markets continued to climb higher for most of November. On November 26th a reality check hit home with the announcement of a new fast spreading Covid Variant. The Omicron variant was first detected in South Africa where it is fast becoming the dominate variant as cases surge and the variant has now been detected on several other continents. The Dow and S&P 500 were both down significantly, posting their worst Black Friday session on record. Oil sold off dramatically down over 11% to close the month around $66 a barrel.
Canada's consumer price inflation rate jumped to a new 18-year high of 4.7% and is set to keep rising. The core rate, which takes out energy and food prices, increased 3.2%. Fuel, transportation and meat products are seeing the steepest price increases in both Canada and the US. Consumers are paying as much as 50% more at the pumps and natural gas is up 28% with winter close at hand. Used vehicles are up 26% and meat is up 15%. The situation is exasperated by the bottle neck in the supply chain with no end in sight. Rising prices inevitably impact the economy as consumers adjust their buying habits.
Fed Chair Powell told Congress on November 30 that it is time to stop talking about "transitory" inflation, meaning that he is changing his view and inflation pressures will last longer than the Fed previously anticipated.
Gold started the month on an uptrend, gaining close to $100 by mid-November but has declined on 'hawkish' Fed statements and a stronger US dollar. Gold is generally quite negatively correlated with the US dollar, meaning when the US dollar rises gold generally declines.
Silver has seen some recent volatility with the price ranging from $23.50 to just shy of $25.50 in November. The price of silver is notoriously volatile compared to that of gold because of the smaller market, lower market liquidity and demand fluctuations between industrial and retail uses. At times, this can cause wide-ranging valuations in the market, creating volatility.
Where in the World are all the Rare Earths?
Critical Metals and Rare Earths have been in the news lately. Prices for the metals moved higher in early November with low supply leading to the price increases. On the subject of rare earths, Canada faces stiff challenges, particularly in processing, as it looks to compete with China and partner with the U.S. on securing supply chains. The problem is that 95% of rare earth element deposits will never have the rare earth metals extracted because the metallurgical recovery characteristics are too complex and too costly. The price of key rare earth elements – vital for generators in wind turbines and magnets for electric vehicles – continued to leap ahead in early November.
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Hope everyone has a happy and safe December!
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