Market Watch: January 2026

The Dramatic Rise and Fall of Precious Metals

January 2026 will be remembered as one of the most volatile months in the history of precious metals. Gold gained close to 29% over the month, pushing to a record above $5,600 per ounce on January 29. The move was largely driven by intense safe-haven demand, as investors sought protection against geopolitical tensions, U.S. fiscal uncertainty, and growing doubts about the direction of monetary policy. Silver went even further. Prices surged roughly 68% in January, briefly trading near $120 per ounce.

That optimism unraveled abruptly at the very end of the month. On January 30–31, markets reacted sharply to the announcement of Kevin Warsh’s nomination as the next Chair of the Federal Reserve. The message was interpreted as a return to stronger institutional discipline and policy credibility, and the reaction across asset classes was immediate. Gold fell by roughly 11–12% in a single session, its steepest one-day decline since the early 1980s. Silver suffered an even more violent adjustment, dropping more than 31%, its worst daily performance since 1980. The move coincided with a sharp rebound in the U.S. dollar and a rapid unwind of the so-called “debasement trade” that had driven metals higher throughout the month.

Global Market Overview

After delivering three consecutive rate cuts, the Federal Reserve paused in January, keeping the fed funds rate in the 3.50%–3.75% range at its January 27–28 meeting, a decision widely anticipated by markets. The accompanying statement leaned slightly more constructive, with policymakers pointing to an economy that “continues to expand at a solid pace,” while acknowledging that inflation remains “somewhat elevated.” Recent data support that assessment: U.S. producer prices rose 0.5% month over month in December, well above the 0.2% increase expected by consensus.

In Europe, growth momentum proved firmer than anticipated. The eurozone economy expanded by 1.5% in 2025, up from 0.9% in 2024 and ahead of the European Commission’s 1.3% forecast. Activity strengthened into year-end, with fourth-quarter GDP rising 0.3% quarter on quarter, supported by higher investment, resilient household spending, and improving exports, even as the region continued to navigate a challenging political and economic backdrop.

Canadian Market Overview

The S&P/TSX Total Return Composite gained 0.8% in January, extending its winning streak to a ninth consecutive month, even as markets lost momentum toward the end of the period. Labor market data pointed to a gradual cooling. The unemployment rate rose to 6.8% in December from 6.5% in November, despite a net increase of 8,200 jobs. The rise in joblessness reflects softer overall labor demand, even as participation remains healthy and service-sector hiring continues to support the labor market. Inflation data were broadly in line with expectations.

Headline CPI rose 2.4% year over year in December, slightly above consensus due to base effects linked to a prior tax break. Underlying inflation, however, continued to ease. Both CPI-median and CPI-trim declined for a third consecutive month, moving closer to the Bank of Canada’s 2% target. On the other hand, growth indicators closed 2025 on a weak footing. Real GDP was flat in November following a 0.3% contraction in October, highlighting the loss of momentum into year-end. Consumer activity showed a similar pattern: retail sales rose a solid 1.3% in November, modestly above the flash estimate, but early December data point to a 0.5% decline, suggesting volumes may also have softened as prices were broadly stable.

Canadian Sector Performance

• Materials: +8.9%: Materials led the gains, despite the end-of-the-month selloff, driven by strong performance in mining and commodity-linked stocks.
• Consumer Staples: -3.6%: Defensive staples lagged as consumer spending patterns and sector rotation weighed on returns.
• Consumer Discretionary: -4.4%: Discretionary stocks underperformed amid broader market volatility and rotation out of cyclicals.

Important Dates

• February 6: Canada Unemployment data
• January 11: U.S. CPI Inflation
• January 16: Canada CPI Inflation
• January 20: Canadian Retail Sales

Portfolio Strategy Tip

January’s sharp swings in precious metals are a reminder of how quickly crowded trades can unwind. A 68% surge in silver in just one month was less about fundamentals and more a sign that positioning had become stretched. Moves like this highlight the value of simple discipline: rebalance after outsized gains, use volatility to make measured adjustments, and stay focused on underlying fundamentals rather than short-term momentum.

Final Thoughts

January’s volatility now feels largely behind us, and there’s limited value in reacting to moves already made. From here, positioning and earnings quality matter more, alongside policy direction under new leadership at the Federal Reserve, geopolitics, and valuation discipline. Large-cap tech remains fundamentally strong but increasingly priced for best-case outcomes. In contrast, much of the broader market—particularly small and mid-caps looks less stretched and better positioned if growth holds. The question is less about the bull market ending and more about whether leadership broadens beyond a narrow group of stocks.