Understanding the dynamics of our Canadian economic landscape, particularly in relation to interest rates and their profound influence on various sectors, is of paramount importance. The real estate market, a cornerstone of our economy, has been significantly impacted by interest rate fluctuations. Many of you may recall a time when the idea of interest rates rising seemed far-fetched, dismissed by some as an impossibility with dire consequences. However, history has proven such predictions wrong, with interest rates skyrocketing multiple times despite initial skepticism—ten times higher since the bottom, to be precise.
Fast forward to the present, and we find ourselves amidst a similar discourse, albeit with a different perspective. Now, experts are proclaiming that interest rates cannot fall, citing potential inflationary pressures and economic instability. Yet, history may repeat itself, as evidenced by recent developments indicating a shift in this narrative.
Consider the latest economic indicators, such as the recent slowdown in U.S. hiring activity and the concerning unemployment report this morning, which has prompted speculation about a potential U.S. Federal Reserve rate cut. While it's crucial to interpret such data cautiously, it's evident that market sentiments are evolving, with increasing anticipation of monetary policy adjustments soon.
Moreover, there's a mounting belief that Canada could be at the forefront of these changes, with speculation rife about the timing of potential rate cuts and their potential seismic impact on the real estate market. This is a crucial aspect for all of us to consider, given the significant role of the real estate sector in our economy. The urgency of understanding and preparing for these potential changes cannot be overstated.
Directing our focus on the real estate market, recent trends reveal a diverse landscape across different regions. For instance, while certain markets, like Calgary, continue to thrive despite higher rates, others, notably the Greater Toronto Area (GTA), are experiencing a slowdown in activity due to a cautious approach. This nuanced understanding of regional trends is not just important, but essential for our strategic planning, emphasizing the need for a comprehensive and localized approach.
In the GTA, for instance, factors such as affordability concerns and anticipation of rate cuts have contributed to a slowdown in sales activity despite persistent demand. However, there's anticipation that a shift in monetary policy could reignite market activity and drive prices higher in the coming months.
Similarly, in Vancouver, while sales remain relatively strong, increasing inventory levels indicate a potential shift in market dynamics, influenced by evolving borrowing costs and buyer sentiment.
Looking ahead, it's reasonable to expect further adjustments in interest rates, albeit gradually, along with fluctuations in market conditions. While uncertainties may persist, it's essential to maintain a strategic outlook and adapt to changing circumstances.
While some predictions may be easier to make than others, it's crucial to remain agile and responsive to evolving economic realities. As we navigate the remainder of 2024, let's stay vigilant, leveraging our collective expertise to navigate potential challenges and seize opportunities for growth and resilience.
By the way, it should be noted that gold and silver have risen 90% of the time, and interest rates have fallen in the past 60 years. What lies on the horizon for both metals will make your decision to own them now one of the best you may make in the coming 5 years. And for those who ask, does this market have legs? Let’s consider this thought for just a minute.
The ascendancy of gold prices since February has been met with a curious indifference from the mainstream investment community. Within the span of just a few weeks, gold has traversed a substantial trajectory, vaulting from its year-to-date low of $1,993 USD spot on February 13th to $2,230 by the close of Q1, culminating in a current valuation of $2,300 USD spot (On a month in which the price peeked above $2400 before offering this gift of a pause).
This gold price movement constitutes a notable surge of nearly 15.5% from its February trough. Yet, this surge appears to have failed to pique the interest of mainstream investors, as evidenced by the ongoing exodus from gold-backed ETFs. The persisting outflows serve as a tangible manifestation of this disinterest.
Remarkably, over the preceding 12-month period leading to March 31st, 2024, the holdings of global so-called “gold-backed” PAPER ETFs have witnessed a discernible decline of nearly 12%. Add to this the fact that approximately 75% of investment advisors have less than 1% exposure to gold, the highest percentage of aversion since 2019, as shown in the chart below, and you get something akin to blatant mismanagement of client funds, in my humble opinion. At what point would your bank, advisors, accountants, or planners suggest that gold is something for you to consider?
