What Does the Gold Rally Mean for the Canadian Stock Market?

Key Takeaways

• Rising gold prices continue to drive the Canadian stock market to new highs.
• The materials sector stands to benefit further from the commodities supercycle that started last year.
• Kinross, Barrick, and Agnico Eagle were standout performers, riding the surge in gold prices.

Gold mining stocks, which led the Canadian stock market’s record performance in 2025, have continued to climb. The price of gold topped USD 5,000 per ounce for the first time this week. However, analysts say the market’s performance could depend largely on ongoing investor appetite for gold.

Materials Momentum Sustained by Gold Rush

Over the past year, the basic materials sector, which includes gold and other precious metal miners, has gained more than 146%. At 14.7%, the sector has the third-largest weighting in the Morningstar Canada Index, but it has been the biggest driver of the index’s performance over the past year. The gold bull run lifted the sector’s contribution to nearly 17% of the index’s overall performance.

In 2025, the sector was the index’s biggest driver, soaring nearly 90%. And it has continued to do the heavy lifting this year, with the Morningstar Canada Basic Materials Target Market Exposure Index surging more than 20%, compared with 4.5% gains for the Canada Index, as of Jan. 26.

Among precious metals names, Barrick Mining ABX, Kinross Gold K, Agnico Eagle Mines AEM, and Wheaton Precious Metals WPM stand out as the best performers, delivering triple-digit annual returns. On a one-year basis, Kinross was the biggest gainer, posting nearly a 240% increase. Barrick (207%), Wheaton (137%), and Agnico Eagle (131%) also far outpaced the Canada Index’s 38% gain.

As a result, they were also among the stocks that had the biggest impact on the index’s outperformance. Agnico Eagle made the largest contribution, accounting for 2.73% of the Canada Index’s yearly performance. Barrick (2.48%), Wheaton (1.62%), and Kinross (1.38%) were the other key contributors.

The robust gains and long-term prospects of the domestic mining sector are drawing investor attention both at home and overseas. China’s state-controlled Zijin Gold announced on Monday a deal to acquire Canadian miner Allied Gold for C$5.5 billion.

Risk Perception Not the Whole Story

Apart from being a growth engine for Canadian investor portfolios, “gold strength can provide a useful counterbalance within portfolios, especially when volatility rises in other parts of the market,” says Chris McHaney, executive vice president, head of investment management and strategy at Global X.

The materials sector has also benefited from the onset of last year’s commodities supercycle, which McHaney sees continuing into 2026 and beyond. That supercycle (a prolonged period of strong demand and high price growth) is underpinned by a powerful mix of cyclical recovery and longer-term structural forces. “The factors contributing to the continuity of the cycle include a historical underinvestment in supply, rising demand tied to AI infrastructure build out, electrification and energy transition, and geopolitical concerns around energy security, as well as a renewed interest in hard assets as inflation hedges,” McHaney explains.

The Path Ahead Looks Bright

Can investors expect a similar blockbuster performance from basic materials guiding the Canadian stock market to another year of outperformance?

“Canada’s equity market tends to be more sensitive to moves in gold than many global peers, simply because of how resource-heavy the economy and stock market are,” says McHaney. He thinks the unabated geopolitical uncertainty and stock market volatility continue to provide a tailwind for gold demand.

However, there is more to the rise in investor appetite for the shiny metal than short-term risk sentiment. McHaney says it’s more a function of structural factors, “including persistent inflation pressures, elevated government debt levels, rising geopolitical concerns, and central bank diversification away from the US dollar.”

Things will depend largely on continued investor enthusiasm for gold, according to Bipan Rai, managing director, head of ETF and alternatives strategy at BMO Global Asset Management. “Traditionally, gold has been viewed as a diversifier in the portfolio, but if the trade and cross-border investment backdrop remains as volatile as it is now, then we’d expect additional demand at the margin,” he says. Such a scenario would sustain demand for gold among opportunistic buyers, which “should keep gold prices supported on dips.”

McHaney has a word of caution for commodities investors: Significant moves from commodities across the board might turn more selective going forward. “Canadians may see stronger dispersion across commodities and companies, with outcomes tied to structurally supported materials rather than broad-based sector moves,” he says.

Ben Jang, portfolio manager and investment strategist at Nicola Wealth, further tempers investor expectations for another bumper year. “It’s much harder to argue for a repeat of a near-blockbuster surge after such a big year because the bar rises. Valuations can be richer, expectations are higher, and some industrial metal demand may have been pulled forward rather than permanently increased,” he says. The sector can still do well, and materials could remain a leader, “but a repeat of last year’s magnitude is not a base case.” Another year of stellar returns “would likely require another major leg higher in bullion and/or another fresh macro shock that intensifies safe haven demand.”