Resource Currencies: Gilt By Association?

The information technology group in both stock markets, not the mining or energy group, has been the top performer. This is a marked departure from 2001 and 2002, when various gold-mining firms led both the Sydney and Toronto markets. Their stocks correctly anticipated the subsequent rise in bullion prices. And the connection between these two markets, adjusted for currency changes, and the CRB index is visible, if not particularly strong statistically. The Toronto market has miners such as Ivanhoe Mines, Bema Gold(BGO Quote) and Golden Star Resources among its leaders, and Sydney is being led by nickel miner Jubilee Mines.

Currency Adjusted Performance Relative to S&P 500

Source: Bloomberg

In the end, neither currency can be called a resource currency as much as an interest rate differential currency. And neither stock market can be called a resource market as much as a technology market; it wasn't too long ago that Nortel Networks(NT Quote) so dominated the Canadian market that the index was referred to as the "TSE 1." All we can say is that so long as American interest rates remain low and commodity prices remain strong -- two trends that appear likely to continue in the near future -- American investors can get a double kick out of buying these resource-related stocks.