Currency Shifts, Gold Lifts, and the CSE Goes Global

The Market Online

3 days ago

INTERVIEW TRANSCRIPT:
ANNA
Hi, my name's Anna Serin, and I'm Director of Listings Development with the Canadian Securities Exchange. You're joining us for episode five of The Market This Month . We're in a very interesting moment for global markets, and at the center of it all is the U.S. dollar. Over the past few months, we've seen a notable decline in the currency against other global currencies, particularly against the Canadian dollar. Behind that move is not just monetary policy or economic data, but something more philosophical—something being quietly referred to as the Mar-a-Lago Accord.
The Mar-a-Lago Accord is the framework guiding the Trump administration's second-term trade and currency agenda. It aims to reduce U.S. trade deficits by addressing what it views as structural imbalances in the global economy, particularly the overvaluation of the dollar. It combines broad tariffs, potential currency interventions, and rethinking of international economic relationships, including proposals to link trade access with national security cooperation.
This proposal is a conceptual revival of the 1985 Plaza Accord, but with a very different tone. Rather than a coordinated global effort to stabilize currencies, this new proposal suggests the U.S. should take deliberate steps to weaken the dollar to boost exports and reduce trade deficits. The idea is rooted in the belief that the dollar's role as a reserve currency makes it structurally overvalued. While this isn't official policy yet, it's already having real-world effects. Investors are watching closely as the market starts to react—from commodities to small caps to capital flows in and out of North America, we're seeing early signs of structural shifts.
Today, we'll break down what this all means for Canadian markets, for investors, and for public companies. We'll talk about who stands to benefit from a weaker dollar, whether the rally of gold is sustainable, and what recent moves in the market might signal about the future of small caps. I'm joined by my wonderful co-host, Bruce Campbell with Stonecastle Investments. Thank you for joining me, Bruce.
BRUCE
Hey, Anna. Good to be here.
ANNA
We're joining each other virtually this month. I'm sad not to have you live in the studio, but hopefully you're enjoying sunshine in Kelowna while we get a little bit of January in Vancouver.
BRUCE
Yeah, it's been good here, for sure.
ANNA
Good. Let's jump right into it. Obviously, our big focus today is the U.S. dollar. We know the U.S. dollar affects global markets and currencies. My question is: the dollar has dropped—is it weak, or are other global currencies strong right now?
BRUCE
To answer your question: both. The dollar is relative to other currencies, and we've seen it decline versus others, so it has been weak. The rapid drop and the percentage move has been significant. As the market ran into volatility at the beginning of the year, the dollar strengthened, which is normal. We tend to see the U.S. dollar as a flight to safety. Then, as things started to stabilize and more about the Mar-a-Lago Accord came out, with both Bessant and Trump talking down the dollar, it declined. We've seen a fairly significant move so far.
ANNA
This will have a lot of ripple effects. Can you talk about how this might affect the Canadian markets?
BRUCE
The biggest thing is the inverse correlation between commodities and the U.S. dollar. Typically, when the dollar declines, commodity prices go up. Last year, we saw a strong move in gold even as the dollar was stable. Now, gold is hitting new highs as the dollar sells off. Other metals like platinum, palladium, and silver have started to move. Oil has recently started to move too. Many point to political issues like tensions in the Strait of Hormuz, but oil was trending up before that. It could be a function of investors reacting to the dollar's decline or anticipating geopolitical heat.
Commodities moving typically creates inflationary pressure, which we haven't talked about in a few months. Canada is so dominated by commodities that our market has outperformed the U.S. so far this year.
ANNA
This creates opportunity for us. It feels so counterintuitive to purposefully create a weaker dollar, doesn't it?
BRUCE
They certainly want to make strategic moves they feel will help their economy both short and long term.
ANNA
Just to clarify, they're doing this to strengthen export abilities? If the dollar is expensive, it makes it harder to do business with other jurisdictions. Plus, they're trying to bolster their economy?
BRUCE
Exactly. In Canadian dollar terms, a few months ago we bottomed out around 68 cents. Now it's in the 73 cent range. That's a significant move. It has an impact—goods priced in U.S. dollars are now a bit cheaper than they were three or four months ago.
ANNA
It'll be interesting to see how that plays out. Let's talk about gold. These are pretty unreal prices, but we're also seeing some misalignment. Are we in a gold rush or a bubble?
BRUCE
I wouldn't say we're in a bubble. If you look at inflation and gold, it makes a lot of sense. Gold typically tracks inflation. One long-held metric is that the price of a good quality men's suit should be about the same as an ounce of gold. That seems to hold true.
However, some indicators show it's potentially extended. Bank of America does a weekly fund manager survey. Right now, they say gold is fairly overvalued and the U.S. dollar is the least favored asset—it hasn't been this out of favor since 2005. Gold is the most over-owned asset class in the survey.
Most of last year, that label belonged to the Mag 7. While some of those stocks have shifted, they haven't fallen apart. Same could be said for gold—it's moved sideways over the last month. Even though the dollar is declining, gold hits new highs, then pulls back. So I wouldn't say it's in a bubble, but we shouldn't be surprised if it stabilizes or drops $200–300 over a short period.
ANNA:
So, good for them. They've obviously done a really great job to have that much support in the markets. I also wanted to mention Dragonfly. They're a drone technology firm. They just raised 3.6 million US under their NASDAQ listing. I thought this was interesting because we're starting to see more and more drone companies coming to the market, which I thought was interesting. That technology really is starting to get implemented in many different ways. We have some other companies coming to us that have some neat drone technology.
But also, I wanted to ask you — they are raising money in the US, and I was curious with what's been going on in our political framework. Some of our issuers wonder how US investors feel about investing in Canadian securities right now. What are your thoughts on that?
BRUCE:
It's definitely a vote of confidence. The fact that these US investors stepped in and invested — and they also did in US dollars — which is great to see as well.
ANNA:
Absolutely. Well, congratulations to Dragonfly. And then finally, just wanted to mention King Global Ventures. They closed an oversubscribed private placement of $5.5 million. The proceeds will fund ongoing exploration and drilling at their Black Canyon Project in Arizona, which includes 213 contiguous concessions and 15 former operating mines within that asset, including the past-producing Howard Copper Mine. The company is focused on precious and base metals exploration across North America.
We continue to see, month by month, these nice little exploration capital raises. I know the markets have been tough in the junior and growth side, but we are seeing these nice little chunks getting raised. What are your thoughts on that? Is this specialized money? Where is this coming from?
BRUCE:
Well, the taps haven't been fully turned on, but in a case like this, where they have old past mines that became uneconomic at some point due to what it cost to mine and metal prices, and now you've seen metal prices rising — it becomes economic again. Turn those lights back on. This is kind of the story of the last couple years — not so much the pure exploration like 'we're going to dig a hole and try to find something,' but more like, 'Hey, we know there's something there, and we just want to restart it and get it producing cash flow.' It's going to take a little money to get there, and then they'll have the cash.
ANNA:
That's amazing. Well, congratulations to all of those CSE issuers on doing so well. Okay, Bruce, before we talk again in a month from now, what should we be thinking about in the markets?
BRUCE:
Lots to watch. We've talked a bit about the bigger picture markets — are we in a bull or a bear? Hopefully we get some clarity on that direction. With that comes sector leadership — what sectors are going to be leading, and where the opportunities lie for the next 6, 12, 24 months.
ANNA:
Alright, well I look forward to chatting with you again in a month. Thank you all for joining us for episode four of The Market This Month. We will be back in June for episode five. We have the Summit on Responsible Investment coming up — we'll be in your hometown of Kelowna. For anyone locally, please come and join us. All the information can be found on our website.
We will be releasing content all summer long highlighting our issuers in the space, so stay tuned. If you go to our YouTube page, feel free to hit subscribe and we'll let you know when new content comes to our CSE TV. Thank you again for joining us, Bruce, and look forward to chatting next month.
BRUCE:
Yeah, exactly.
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