Canada's current account deficit just widened to $7.2 billion - the 15th straight quarter in the red and worse than economists expected. The driver isn't autos or oil this time.
It's gold.
The current account is the broadest measure of how much money flows in and out of a country, tracking trade in goods and services, investment income, and transfers. Canada's deficit widened by $6.2 billion in the first quarter, much worse than the C$4.3 billion economists were expecting.
The trade in goods deficit alone widened by $3.3 billion to $7.7 billion as imports rose faster than exports. Imports hit a record $211 billion, with the biggest single driver being metal and non-metallic mineral imports up 38%.
Most of that was gold, riding the surge in precious metal prices.
Exports of goods rose 3.9% to $203.3 billion, with energy products and gold leading the export side too. Auto exports fell to levels last seen at the start of the pandemic.
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Even as the trade gap widened, foreign investors couldn't get enough of Canadian debt. They bought a record $78.6 billion of Canadian bonds in the first quarter, mostly federal government and corporate paper.
Canadian investors went the other way on US stocks. They snapped up a record $40.3 billion of American equities, mostly large-cap tech, with the buying concentrated in February.
So the picture is unusual. Foreign money is rushing into Canadian fixed income while Canadian money is rushing into US tech, and both directions reflect investors searching for yield and growth where they can find them.
A current account deficit isn't automatically bad. It usually just means a country is consuming and investing more than it's saving, financing the difference with foreign capital.
Canada has done this for years without issue. The bigger flag here is what's behind it.
The Canadian economy is leaning hard on energy and metals, and those are cyclical industries with prices that move on global demand. What gold does next will decide what Q2 looks like.
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