The gold frenzy is lifting the Canadian stock index! The first half of the year surged by 8.6%, surpassing the S&P 500.

Notably, despite facing ongoing trade tensions and economic weakness, Canada's major stock indices outperformed the US benchmark indices in the first half of the year, thanks to record-breaking increases in gold prices. As of June 30th, the S&P/TSX Composite Index had risen by 8.6% year-to-date, surpassing the 5.5% increase of the S&P 500 Index during the same period. When calculated in US dollars, the Toronto index rose by 15%, matching the gains of other global indices with high exposure to gold. "Undoubtedly, this rally is being driven by gold," said Sadiq Adatia, Chief Investment Officer at Montreal Bank Asset Management. Investors flocked to gold and precious metal mining stocks to hedge against the risks posed by President Trump's tariff threats, as well as geopolitical tensions and conflicts in the Middle East. This trend fueled the rise of the Toronto stock indices. "You need to position yourself in assets that can withstand risks, and gold is the best choice," Adatia said. As of June 18th, gold and silver stocks contributed to half of the gains of the S&P/TSX Composite Index. Analyst Simon Fitzgerald-Carlyle of CIBC World Markets noted in a report released that day that this "abnormal" performance was "driven by the high level of uncertainty regarding US tariff policies and their potential impact on economic growth." Four out of the top ten performers in the first half of the year were precious metal stocks, including Agnico Eagle Mines and Wheaton Precious Metals. Furthermore, the top performers in the index were mostly precious metal miners, with Lundin Gold leading the pack with a nearly 135% increase. The current question is whether this rally led by gold will dissipate as gold prices have fallen with reduced geopolitical and trade risks by the end of June. "I do not believe that gold will repeat the performance of the first half of the year in the second half, as many of the uncertainties we faced earlier have dissipated," said Adatia from Montreal Bank. Strategist Gillian Wolfe wrote in a report on June 11th that since April, earnings forecasts for constituent companies of the S&P/TSX had "significantly" declined, and the index's "high exposure to the beleaguered energy sector was disproportionately dragging down overall forecasts." However, Leslie Marks, Chief Investment Officer of McKenzie Investments, pointed out that besides the gold story, there are other growth opportunities for Canadian stocks. She stated that global investors are injecting funds into the Toronto Stock Exchange due to its higher exposure to the materials, energy, and financial sectors. Marks also noted that Canada's new Prime Minister, Mark Carney, is advocating for a "very pro-investment, growth-promoting, and economy-focused" governing agenda. She added that the P/E ratio of the S&P/TSX Composite Index is 17 times, much lower than the valuation of the S&P 500 Index at 24 times. "I believe that Canadian stocks have a fundamental story based on government policy changes, as well as a valuation story," Marks said.