Market volatility returns to Canada as metals unwind sharply
Corrado Tiralongo - Feb 02, 2026
Executive summary
Canadian equities declined today, with the S&P/TSX Composite Index down 3.31%, driven almost entirely by a steep selloff in metals and mining equities, which declined 11.26%. The equity move closely tracked an aggressive unwind in precious metals futures, with gold, silver, platinum down approximately 11%, 31% and 19% respectively.
While the magnitude of the decline was notable, the drivers appear concentrated rather than systemic. The move reflects a repricing of crowded precious-metals exposures following an extended momentum-driven rally. As highlighted in earlier gold commentaries, elevated retail participation and FOMO-type behaviour had increased the risk of abrupt reversals once sentiment shifted. Today’s move is consistent with that framework and does not, in our view, signal a deterioration in broader Canadian or global economic fundamentals.
What happened in markets today
The Canadian equity market weakened steadily through the afternoon before accelerating lower into the close. Sector performance was highly uneven. Outside of materials, market declines were comparatively modest. The materials sector, and within it precious metals producers, accounted for the overwhelming majority of the index-level decline.
This pattern suggests that today’s move was not a broad-based risk-off event, but rather a sector-specific adjustment following a prolonged period of strong performance. The selloff appears to have been driven less by new macroeconomic information and more by a rapid reassessment of positioning within a narrow segment of the market.
Precious metals: from macro hedge to momentum trade
In prior commentaries on gold and commodities, it was noted that while precious metals were supported by legitimate macro considerations, including fiscal sustainability concerns, geopolitical risk, and debates around central bank credibility, price behaviour had begun to reflect additional, less durable forces.
Specifically, the following signs were highlighted:
• rising retail participation
• momentum-driven buying behaviour
• narrative reinforcement across digital and social channels
• diminishing sensitivity to valuation and real-rate dynamics
As positioning becomes increasingly narrative-led rather than valuation-anchored, liquidity can prove thinner than it appears. In these environments, reversals, when they occur, tend to be abrupt and nonlinear. The scale of the decline across gold, silver, and platinum futures is consistent with that dynamic.
Linking today’s move back to earlier gold commentaries
In earlier gold and commodities commentaries, it was noted that while precious metals were supported by credible structural themes, the rally was becoming increasingly dependent on momentum-driven flows. That dynamic raised the risk of sharp reversals once sentiment shifted. Today’s price action is consistent with that assessment and reflects a repricing of positioning rather than a change in the underlying macro backdrop.
Portfolio positioning context
In recent commentaries, it had been noted that Canadian equities appeared increasingly challenged on a relative basis within the prevailing macro and geopolitical environment. While headline index performance had been supported by strength in gold and other metals, the underlying drivers of return were becoming progressively narrower and more dependent on momentum rather than broad-based earnings growth.
Against that backdrop, and prior to the selloff, multi-asset portfolios had been positioned with reduced exposure to Canadian equities, alongside increased exposure to U.S. equities and liquid alternatives. This positioning reflected an assessment that the relative return potential for Canadian equities had become less compelling, particularly given index concentration, sensitivity to commodity price swings, and the opportunity set available elsewhere within diversified portfolios.
Liquid alternatives were viewed as increasingly valuable portfolio components in this environment, both as diversifiers and as potential sources of return less reliant on traditional equity beta. This positioning was not a reaction to near-term market movements, but an extension of a broader portfolio construction framework focused on managing concentration risk and improving risk-adjusted outcomes.
Policy expectations and the catalyst for repricing
The selloff was likely catalysed by renewed focus on U.S. monetary policy leadership, following reports that Kevin Warsh is expected to be nominated to succeed Jerome Powell as Chair of the Federal Reserve.
While reactions across equities, rates, and currencies were relatively contained, the implications for precious metals were more pronounced. Warsh is generally viewed as emphasizing balance-sheet discipline and institutional credibility, rather than advocating materially looser financial conditions. Against a backdrop of crowded positioning, even a modest reduction in perceived policy tail risk can be sufficient to trigger a sharp reassessment.
It is also notable that precious metals had already begun to weaken prior to these reports, reinforcing the view that positioning and momentum, rather than new information, were the dominant drivers of the move.
Canada’s market structure amplified the decline
Canada’s equity market composition magnified the impact of the metals unwind. With a higher exposure to resource equities, particularly precious metals producers, the S&P/TSX tends to reflect commodity-specific adjustments more acutely than many global peers.
As a result, what was fundamentally a global repricing of precious-metals risk translated into a disproportionate index-level decline, despite limited change in domestic macro data, earnings expectations, or financial conditions.
Portfolio implications and observations
From a portfolio construction perspective, the market action reinforces several observations that have featured prominently in prior work.
First, assets often viewed as diversifiers can behave differently when flows become momentum driven. Precious metals can play an important role in portfolios over full cycles, but short-term behaviour can diverge meaningfully during crowded trades.
Second, market concentration matters. Canada’s experience underscores the importance of understanding not just asset class exposure, but the underlying drivers of returns within those exposures.
Closing thoughts
The decline in Canadian equities was notable, but also highly specific. It reflected a rapid unwind of precious-metals positioning following a period in which retail momentum and narrative reinforcement had become increasingly influential, a risk previously highlighted in earlier commentaries.
As markets continue to navigate shifting policy frameworks, evolving productivity narratives, and geopolitical uncertainty, portfolio outcomes are likely to be influenced as much by structure and positioning as by headline returns. Distinguishing between structural signals and momentum-driven noise remains central to disciplined portfolio management.
Corrado Tiralongo (he/him)
Vice President, Asset Allocation & Chief Investment Officer
Canada Life Investment Management