Canada's primary stock market, the S&P/TSX Composite Index, concluded Monday's trading session in negative territory, marking a subdued start to the final week of the year. The decline was primarily fueled by a significant pullback in precious metals, which dragged down mining and materials shares.
Market Performance and Key Drivers
The benchmark S&P/TSX index closed down 0.32% at 31,896.59 points on December 29. Despite this daily loss, the index is on track for a gain of approximately 2% in December. This would mark its eighth consecutive monthly gain, a streak not seen since 2014. For the entire year, the TSX has delivered a stellar performance, rising by 29% and securing its third straight annual gain. This represents the index's strongest yearly performance since 2009.
Alfred Lee, Deputy Chief Investment Officer at Toronto-based Q Wealth Partners, highlighted the year's exceptional drivers. "This year was phenomenal. That was really driven by two key factors. The mining stocks- gold had a phenomenal year and silver had an even better year. What also helped the TSX was the Canadian bank stocks," Lee stated.
Precious Metals and Sectoral Movement
The day's losses were spearheaded by the materials sector. The gold sub-index plunged 4.02%, while the broader materials sector fell 2.88%. This retreat came as investors locked in profits from the massive yearly rally in precious metals, amid perceptions of easing geopolitical tensions that reduced safe-haven demand.
On the commodities market, gold prices slipped 4.3%, and silver prices slid 8.3%. Silver had earlier in the session touched a record peak above $80 an ounce before the sharp correction. Reflecting this, major mining stocks saw substantial declines:
- Kinross Gold shares fell 3.6%.
- Agnico Eagle shares dropped 5.3%.
- Barrick Mining shares declined 2.8%.
- Endeavour Silver closed down 1.9%.
- Silvercorp Metals fell 3.4%.
Commenting on the future outlook, Alfred Lee added, "Because gold and silver have gone on such a phenomenal run this year, I wouldn't be surprised if we get a short term pullback some point next year."
Offsetting Gains and Market Outlook
The decline on the TSX was partially cushioned by a strong performance in the energy sector. Energy shares gained 1.01%, tracking a more than 2% rise in oil prices. This surge came as investors balanced hopes for Ukrainian peace talks against the potential for oil supply disruptions in the Middle East.
As the year draws to a close in a typically quiet period for data, market participants are now looking ahead to the release of the minutes from the latest U.S. Federal Reserve meeting, scheduled for Tuesday. This document will be scrutinized for insights into the central bank's future policy direction.
The day's activity underscores the TSX's heavy reliance on the natural resources and financial sectors for its historic yearly gains, even as these same sectors introduce volatility in the short term.
