04:19 PM EST, 03/05/2024 (MT Newswires) -- For the second straight session, the Toronto Stock Exchange (TSX) closed down modestly, today losing just five points, having lost more than 20 points on Monday. Once again, a record high price for gold wasn't enough to offset a lower oil price and uncertainty around the interest rate path in North America. Both the S&P 500 and Nasdaq lost at least 1% on this Tuesday.

Indeed, on rates, there is at least some domestic concern that the Bank of Canada is priced for less monetary easing than the U.S. Federal Reserve, while there are fears the Fed will potentially be backed into "one of the most difficult corners: stagflation" -- which is basically the simultaneous appearance of slow growth, high unemployment, and rising prices.

Sectors on the TSX were mixed, with Base Metals the biggest percentage loser, down 1.8%, despite gold shining. Battery Metals and Energy (despite lower oil) led the gainers.

Of commodities today, gold rose to a new record for the third-straight session as buying momentum for the precious metal continues. Gold for April delivery closed up $15.60 to settle at US$2,141.900 per ounce, surpassing the record close set a day earlier. The price of the metal is being supported by an expectation that interest rates in developed countries will soon be lowered as inflation eases. Jerome Powell, the chair of the Federal Reserve, will begin two days of congressional testimony on Wednesday amid hopes he will offer firmer detail on when rate cuts will begin. The record also comes amid a steady dollar and strong treasury yields, though yields eased early on Tuesday.

But West Texas Intermediate crude oil closed lower for a second session, retreating back to the range it has traded for over the past four months despite OPEC+'s weekend extension of 2.2-million barrels of voluntary production cuts through June. WTI crude oil for April delivery closed down $0.59 to settle at US$78.15 per barrel, while May Brent crude, the global benchmark, was last seen down $0.70 to US$82.10. The drop is the second-straight session of weaker prices following the OPEC+ announcement on Sunday as prices remain firmly rangebound with the cartel's cuts offset by rising output from the U.S. and other western hemisphere countries and weak demand from China as a real-estate debt crisis weighs on its economy.

Looking at the interest rate question a little more, Desjardins in a preview note published ahead of tomorrow's monetary policy update from the Bank of Canada noted that markets have pared back expectations for rate cuts this year. But, Desjardins asked itself, has the pendulum swung too far? In answering its own question, Desjardins thinks the 'roughly' 80bps worth of BoC rate reductions implied by swap pricing is "not enough to account for the monetary easing that will ultimately be required."

"The fact that the Bank of Canada is priced for less monetary easing than the US Federal Reserve strikes us as particularly odd given how well the American economy is performing," Desjardins said, before adding: "While a rate cut is not in the offing just yet, Canadian central bankers might feel more comfortable delivering a dovish message this week since markets are far from aggressively pricing in rate cuts."

Meanwhile, in relation to the U.S., Stifel in an 'Economic Month-in-Review' for February 2024, noted with price pressures accelerating at the start of the year, investors appear to have dialed back expectations -- "at least somewhat" - for future rate hikes, lowering forecasts from 150bps at the start of the year to 85bps at month end. "Of course," Stifel said, "while the economy remains solid with consumers continuing to spend and ongoing business investment, the weight of higher prices and borrowing costs, as well as the resumption of student debt payments amid dwindling stimulus and savings has resulted in a growing level of fatigue, likely to result in a further loss of topline momentum. Potentially sidestepping an outright recession or downturn near term, a more precipitous slowdown in the domestic economy, coupled with still-above inflation could potentially back the Fed into one of the most difficult corners: stagflation."