Gold and silver bars at the Pro Aurum gold house in Munich in January, 2025.Angelika Warmuth/Reuters
A sudden pullback in the price of gold and silver last week was the latest reminder, as if any were needed, that Canadian investors looking for ways to hedge risk in their portfolios have no easy answers.
The rout in precious metals came after Japanese government bonds sold off the previous week, leaking into U.S. Treasury bonds and causing a brief panic in equity markets. Last Wednesday, Bank of Canada Governor Tiff Macklem warned that the “safe haven role of the U.S. dollar has been dented,” as he cautioned that “elevated uncertainty” clouded the policy outlook.
In an uncertain environment, experts say that Canadian investors should focus not on the performance of specific assets, but on broader questions around their allocations and overall strategy.
“One of the biggest challenges with safety is you need to decide what is unsafe. And oftentimes what is unsafe and what you think is safe is wrong,” said Jason Heath, managing director of Objective Financial Partners in Toronto.
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Gold, which hit a record high of more than US$5,600 an ounce last week, is a case in point. Having roughly doubled over the past year, fuelled by a steady weakening of the U.S. dollar, the price of gold slid more than 12 per cent on Friday in its biggest daily drop in more than 40 years.
Silver, which recently topped US$120 an ounce on a frenzy of investment demand, plunged more than 27 per cent on Friday for its worst day on record, though it still recorded a monthly gain.
Analysts ascribed the drops to profit-taking as the announcement that U.S. President Donald Trump will nominate former Federal Reserve governor Kevin Warsh to head the U.S. Federal Reserve prompted investors to scale back expectations for aggressive U.S. interest rate cuts.
While other traditional safe havens have not seen falls of similar magnitudes, George Davis, chief technical strategist at RBC Capital Markets, said in an e-mail that the broader market environment had prompted a shift.
“Rising and lingering geopolitical and geoeconomic risks have sidelined the [U.S. dollar] and to a certain extent Treasuries from the safe haven equation,” he said. He added that concerns over rising inflation and possible fiscal stimulus that drove the Japanese bond sell-off had reduced the safe-haven qualities of the yen, leaving the Swiss franc as the only clear alternative.
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In its annual World View report released last week, the Investment Management Corporation of Ontario, one of Canada’s biggest institutional investors, said that it recommended investors “explore potential alternatives to the [U.S. dollar] as a store of value and safe haven during periods of market stress,” including the Swiss franc, yen and gold.
It said that fixed-income investors should shift to shorter maturities to guard against a potential rise in longer-term U.S. yields because of tariffs and a weaker dollar, and suggested considering assets “tied to production and the physical economy.”
Lorne Gavsie, head of macroeconomic and foreign exchange strategy at CI Global Asset Management, said market swings showed the importance of having diversified investments. “A portfolio now is not just about stocks and bonds,” he said, adding that commodities and private assets could help to play a stabilizing role.
Mr. Heath suggested a simpler approach: Investors should focus on maintaining and rebalancing portfolios that match their individual risk tolerance instead of trying to guess the direction the market.
For some investors, the answer may not even lie in the assets part of their net-worth equations, but in whether their household’s finances are in order.
“One way to hedge risk is to consider a liability-first approach: focusing on reducing debt and financial obligations, which can be an effective way to lower risk and improve overall financial health,” Carissa Lucreziano, vice-president of financial planning and advice at CIBC, said in an e-mailed response to questions.
Canadians’ household credit market debt, which includes consumer credit and both mortgage- and non-mortgage loans, grew faster than incomes in 2025, Statistics Canada data showed. As of December, for every dollar of household disposable income, Canadian households owed $1.77 in consumer and mortgage debt.
Meanwhile, Canada’s conventional five-year mortgage rate stood at 5.06 per cent in December, against an average rate of 4.38 per cent over the previous 15 years.
“Debt repayment and interest avoidance is a safe haven” said Mr. Heath, particularly for investors with money in their tax-free savings accounts.
“Do you think you’re going to earn a higher rate of return on your TFSA than the interest rate that you’re paying on your mortgage?”
