Commodity Rally Sets Positive Tone For Canadian Markets Amid Policy Uncertainty

Canadian stock markets are poised to start the week on a positive note, buoyed by a rally in precious metals and other commodities. However, the optimistic sentiment may prove short-lived, as investors remain on guard against mounting trade uncertainties and await critical monetary policy announcements from both the Bank of Canada and the Federal Reserve scheduled for Wednesday.

Metal Prices Surge On Geopolitical Tensions

The rally in commodities provides the foundation for markets’ positive outlook. Gold futures surged by $108.80, or 2.18%, reaching $5,088.50 per ounce, while silver futures posted an even more impressive gain of $8.507, or 8.4%, climbing to $109.840 per ounce. Copper futures also advanced, up $0.405 or 0.67% to $5.9880 per pound. This commodity strength reflects renewed geopolitical concerns, particularly escalating tensions between the U.S. and Iran, which typically drive investors toward safe-haven assets like precious metals.

Crude oil markets, however, painted a different picture, with West Texas Intermediate futures dipping marginally to $61.02 a barrel, suggesting some caution despite broader commodity strength.

Tariff Threats Create Trading Caution

The positive market tone is tempered by ongoing trade policy uncertainty. U.S. President Donald Trump renewed his threat to impose a 100% tariff on Canadian goods should the country pursue a trade deal with China. In response, Canada’s Prime Minister reaffirmed the nation’s commitment to the United States-Mexico-Canada (USMCA) trade agreement, ruling out free trade arrangements with non-market economies.

This trade rhetoric has injected an undercurrent of caution into trading activity, preventing investors from making aggressive bets despite the recent commodity price gains.

Canadian Markets Edge Higher On Resource Strength

On Friday, the S&P/TSX Composite Index settled at 33,144.98, up 142.28 points or 0.43%, driven primarily by gains in energy and materials stocks. These sectors benefited directly from the climb in commodity prices, demonstrating the close link between resource valuations and global market dynamics.

Global Markets Show Mixed Signals

Asian markets displayed caution on Monday, ending mixed across the region. Australia’s exchanges remained closed for Australia Day, while Indian stock exchanges observed Republic Day. Across the major European markets, subdued trading dominated as investors awaited the Federal Reserve’s policy announcement and tracked significant corporate earnings due this week.

The cautious tone reflected broader concerns about U.S. tariff policies, geopolitical tensions, and the uncertain economic outlook these factors create. Trade concerns intensified following Trump’s tariff threats, keeping investors hesitant about making bold positioning moves.

Week Ahead: Central Bank Decisions

The coming week presents a critical test for markets. The monetary policy announcements from both the Bank of Canada and the Federal Reserve on Wednesday will likely shape trading sentiment for the remainder of the week. Investors are closely monitoring these decisions for signals about economic growth prospects and inflation management amid the current trade tensions.

For now, commodity strength offers a positive note for resource-heavy Canadian markets, but this support remains fragile given the policy uncertainties ahead.