The Role of Gold and Tech in Driving the TSX’s Record Highs

The Toronto Stock Exchange (TSX) has surged to record highs in 2025, outperforming the S&P 500 by nearly 5 percentage points as of mid-July [1]. This momentum is driven by two key sectors: gold and technology. While gold has emerged as a dominant force due to central bank policies and geopolitical tensions, the technology sector continues to benefit from macroeconomic tailwinds, albeit with emerging challenges. This analysis explores how strategic sector rotation and central bank interventions are reshaping the TSX’s trajectory.

Gold: A Safe-Haven Catalyst

Gold has been the single largest contributor to the TSX’s gains, accounting for 30% of its year-to-date performance [2]. The S&P/TSX Global Gold Index has surged 40% in 2025, propelled by a 30% rise in gold prices to US$3,400 per ounce [3]. Central banks have played a pivotal role in this rally, with global purchases reaching 166 tonnes in Q2 2025 alone [4]. This trend reflects a broader shift toward diversification of reserves, as nations seek to mitigate risks from U.S. dollar volatility and geopolitical instability, including the freezing of Russian assets by Western powers [5].

The Federal Reserve’s tightening cycle and the U.S. Treasury’s 4.31% 4-week T-bill yield have further amplified gold’s appeal as a hedge against inflation and currency devaluation [6]. Gold ETFs have seen record inflows, with assets under management (AUM) rising 41% to US$383 billion in the first half of 2025 [4]. This dynamic has solidified gold’s 12% weight in the S&P/TSX Composite index, making it a cornerstone of the index’s outperformance [3].

Technology: Sustaining Momentum Amid Fatigue

The Information Technology sector has maintained its upward trajectory, building on a 30% return in 2024 [7]. However, signs of fatigue are emerging in the U.S. tech landscape, where large-cap stocks like Tesla and Alphabet have underperformed [2]. Despite this, Canadian tech firms have benefited from global demand for AI and semiconductor infrastructure, which remain critical to industrial and energy transitions.

Strategic sector rotation has favored technology due to its resilience in a high-yield environment. Financials and Industrials have also outperformed, driven by tighter monetary policy and reindustrialization trends [6]. However, the sector faces headwinds if U.S. tariffs on gold-related industrial applications—such as those used in semiconductors—intensify [5].

Central Bank Policies and Sector Rotation

Central bank actions have directly influenced sector allocations. As global central banks continue to stockpile gold, investors have rotated into gold-linked assets, pushing the TSX higher [1]. Conversely, defensive sectors like Utilities and Real Estate are poised to gain if the Federal Reserve eases in 2026, as higher Treasury yields begin to wane [6].

Strategic recommendations for investors include overweighting Financials and Industrials while maintaining defensive hedges in Utilities and Real Estate [6]. The healthcare sector, which saw strong gains in 2024, has reversed course in 2025, underscoring the importance of dynamic rebalancing [7].

Conclusion

The TSX’s record highs in 2025 are a testament to the interplay between gold’s safe-haven appeal and technology’s growth potential. Central bank policies and macroeconomic shifts have created a fertile ground for sector rotation, with gold and tech serving as dual engines of growth. As geopolitical and monetary uncertainties persist, investors must remain agile, leveraging these dynamics to optimize returns while mitigating risks.

Source:
[1] Gold surge powers TSX ahead of S&P 500 in 2025 [https://www.wealthprofessional.ca/news/industry-news/gold-surge-powers-tsx-ahead-of-sp-500-in-2025/389821]
[2] TSX rides gold surge as central banks and volatility reshape investment flows [https://www.benefitsandpensionsmonitor.com/news/industry-news/tsx-rides-gold-surge-as-central-banks-and-volatility-reshape-investment-flows/392284]
[3] Gold Mid-Year Outlook 2025 [https://www.gold.org/goldhub/research/gold-mid-year-outlook-2025]
[4] Gold Demand Trends: Q2 2025 [https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2025]
[5] Gold and Trump's chaos are key to the TSX's stellar performance [https://www.theglobeandmail.com/business/article-tsx-performance-gold-trump-chaos/]
[6] Navigating the Yield Cycle: Strategic Sector Rotation in a... [https://www.ainvest.com/news/navigating-yield-cycle-strategic-sector-rotation-shifting-monetary-landscape-2507/]
[7] A look back at 2024 in the lens of S&P/TSX sector indices [https://www.tmxinfoservices.com/insights?id=222]