Canadian Stocks Rise to 5-Month High as Gold Jumps on U.S. Data

Canadian stocks rose, closing at the highest level in five months, as gold producers surged after a plunge in U.S. new-home sales boosted speculation the Federal Reserve will maintain stimulus.

Alacer Gold Corp. and Iamgold Corp. rallied at least 5.9 percent as the metal traded at its highest in 11 weeks. Maple Leaf Foods Inc. jumped 7.8 percent as it agreed to sell a unit for C$645 million ($614 million). Penn West Petroleum Ltd. added 1.7 percent after cutting 25 percent of its workforce to reduce costs.

The Standard & Poor’s/TSX Composite Index rose 87.95 points, or 0.7 percent, to 12,762.30 at 4 p.m. in Toronto, the highest level since March 20. The index erased losses from earlier in the week to finish the five-day period 0.2 higher.

“We’re seeing a lot more volatility creep in, especially in the U.S., and that’s pushing people back to gold as a safe haven,” said Andrew Pyle, a fund manager with ScotiaMcLeod Inc. in Peterborough, Ontario. He manages about C$210 million. “When we look forward, we’re still talking about the Fed tapering, that’s why you’re seeing the gold producers in Canada mount a gradual recovery.”

Sales of newly built homes in the U.S. plunged the most in more than three years last month. The July minutes of the Federal Open Market Committee showed policy makers are “supportive” of Chairman Ben S. Bernanke’s plan to begin scaling back the bank’s $85 billion a month bond purchases later this year. Central-bank stimulus has helped propel global equities higher.

‘Reassessing Growth’

“The data may have markets reassessing U.S. growth and when, or by how much, the Fed will taper quantitative easing,” said Andrew Grantham, an economist with CIBC World Markets in a note today.

The price of gold rallied on the housing data, briefly topping $1,400 an ounce to its highest level since June 7. The price of gold settled up 1.5 percent at $1,396.30.

The S&P/TSX Gold Index surged 2.7 percent to a four-month high. While the index has rallied 42 percent since June 26, it remains down 27 percent this year. Alacer Gold soared 7.2 percent to C$3.27 and Iamgold rallied 5.9 percent to C$7.06.

Raw-materials producers climbed 1.6 percent as a group for the biggest gain in the S&P/TSX, with all 10 industry groups advancing. Trading volume was 18 percent lower than the 30-day average.

Bank Rally

Royal Bank of Canada, the nation’s largest lender, gained 1 percent to C$65.12 as Canada’s banks rose 0.8 percent to close at the highest this month. Bank of Montreal, scheduled to report earnings on Aug. 27, added 0.7 percent to C$65.20 for a fourth day of gains.

Maple Leaf, the Canadian food processor, jumped 7.8 percent, the most in almost five years, to C$14.44, after agreeing to sell its Rothsay animal-rendering business to Darling International.

Suncor Energy Inc. added 1.9 percent to C$36.06 as crude erased earlier losses to advance 1.3 percent in New York on signs of accelerating economic growth in Europe and unrest in the Middle East.

Penn West Petroleum, based in Calgary, rose 1.7 percent to C$12.12. The company has cut 550 jobs from the beginning of the year and expects to record an expense of about C$25 million in the third quarter related to the move.