July 23, 2008 / 1:18 PM / 11 years ago

Toronto stocks set to open lower on weak resources

*Gold drops to $938 an ounce

*Oil falls to around $126 a barrel

*Precision Drilling reports lower Q2 results

TORONTO, July 23 (Reuters) - The Toronto Stock Exchange’s main index is set to open lower on Wednesday, as the weak price of gold and oil was seen dragging the resource-laden benchmark down.

Gold slipped to around $938 an ounce on the back of lower oil prices, reducing the precious metal’s appeal as an inflation hedge, and amid a stronger U.S. dollar.

The price of oil was also weaker — below $126 a barrel — as worries eased that Hurricane Dolly would hit crude supply.

“I think the big story in Toronto is likely to be the gold sector,” said Bob Gorman, chief portfolio strategist, TD Waterhouse in Toronto.

“The TSX tends to be heavily influenced by that and we’re also seeing crude prices off a bit this morning.”

The benchmark index slipped sharply midday on Tuesday, but trimmed earlier losses as a rise by financials offset a drop in resource issues.

Investors scooped up shares in financials as a string of upbeat quarterly results from U.S. banks led to hopes that the financial sector was a step closer to stabilizing.

But that could also prompt investors to lock-in some profits in the influential sector, said Gorman.

Investors may also mull inflation data released on Wednesday morning.

Canada’s annual inflation rate exceeded expectations with a reading of 3.1 percent in June from 2.2 percent in May after the biggest yearly surge in gasoline prices since Hurricane Katrina, Statistics Canada said on Wednesday.

June marked the first time since September 2005 that inflation rose past the central bank’s target range of 1-3 percent.

Whether the data will be the harbinger of negative sentiment remains to be seen, said Gorman.

“Inflation is the enemy of bonds and that does have a flow-through effect into financials,” he said.

In company news, Precision Drilling Trust PD_u.TO could be in focus after Canada’s biggest oil and gas contract driller reported a drop in second-quarter profit on Wednesday.

Zarlink Semiconductor Inc ZL.TO could also draw attention after it reported its first-quarter results.

The S&P/TSX composite index .GSPTSE begins the day at 13,643.19, after slipping 46.00 points, or 0.3 percent on resources in the previous session. ($1=$1.01 Canadian) (Reporting by Jennifer Kwan; Editing by Scott Anderson)

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