Precious metals slump drags TSX nearly 1,000 points, what investors should do
The S&P/TSX dropped almost 1,000 points Friday after a sell-off in precious metals following President Trump’s pick for Fed chair. Here’s how that rippled through markets and what to consider for personal portfolios.
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By Torontoer Staff
Canada’s main stock index fell sharply on Friday after a sell-off in precious metals following U.S. President Donald Trump’s announcement of Kevin Warsh as his choice to lead the Federal Reserve. The S&P/TSX composite lost 992.37 points, trading at 32,023.76 in early afternoon activity.
The move hit metal miners and resource-linked stocks hardest. April gold futures tumbled US$348.80 to US$5,006.00 an ounce, reversing part of a year in which gold has risen more than 70 per cent.
Why the metals sell-off sent markets lower
Investors repositioned after the Fed nominee was viewed as relatively hawkish, which strengthened the U.S. dollar and reduced demand for dollar-priced safe havens such as gold. Allan Small, senior investment adviser at iA Private Wealth, said the price moves were meaningful and clearly linked to the nomination news.
You’re seeing metals retreat for the first time, and I’d say a bit of a meaningful retreat.
Allan Small, iA Private Wealth
Higher expected interest rates make non-yielding assets like gold less attractive. That dynamic, combined with the heavy weight of materials and miners in the TSX, pushed the index lower on a day when major U.S. stock averages also lost ground.
How U.S. Fed leadership affects everyday investors
The Fed chair influences interest-rate policy, which affects mortgage costs, bond yields and the value of the Canadian dollar. Markets trade on expectations for rate direction. If investors expect a more hawkish Fed, the U.S. dollar tends to strengthen and assets priced in dollars can weaken.
Small noted the nomination could reduce concerns that the Fed is being influenced by the White House. He said that perception can matter for investor confidence because an independent central bank is expected to make decisions that manage inflation even when policies are painful in the short term.
Kevin Warsh, who is more hawkish perhaps than maybe some of the other candidates seem to be, that gave a bit of a boost to the U.S. dollar and a bit of a selloff for gold and some of the metals that obviously are priced in U.S. dollars and act as a hedge against the U.S. dollar.
Allan Small, iA Private Wealth
What this means for your portfolio
A single day of volatility does not require a major portfolio overhaul. For investors with exposure to resource stocks or physical metals, a drop in commodity prices will show up quickly in account values. For those with diversified allocations, equities in other sectors and fixed income can temper swings.
Technology stocks also contributed to market pressure. Large-cap tech names can amplify moves across U.S. indices, and investors recently focused on spending plans and capital allocation in earnings reports rather than headline revenue beats.
Practical steps for investors
- Review your asset allocation and ensure it matches your risk tolerance and timeline.
- Avoid knee-jerk selling after a single volatile session, unless your financial plan requires changes.
- Use market dips to rebalance if you are underweight target allocations.
- Consider currency exposure if you hold U.S.-priced assets, since a stronger U.S. dollar affects returns in Canadian dollars.
- If you hold gold or other metals as a hedge, decide whether you want exposure through bullion, ETFs, or resource stocks and stick to a planned allocation.
If you are unsure, speak with a financial adviser before making major changes. Advisers can help translate market moves into specific steps for registered accounts, savings for retirement and short-term needs.
Market snapshot from Friday
Major indices in New York moved lower. The Dow Jones industrial average fell 529.07 points to 48,542.49. The S&P 500 dropped 55.96 points to 6,913.05, and the Nasdaq lost 225.71 points to 23,459.41. Microsoft, a major tech name, sold off around 10 per cent after investors weighed its spending plans despite stronger profit and revenue.
The Canadian dollar traded at 73.69 US cents, down from 73.99 US cents on Thursday. The March crude contract was up 26 cents to US$65.68 per barrel.
Short-term market moves can be noisy. Investors who keep a clear plan in place are better positioned to absorb volatility and act when opportunities align with their long-term goals.
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