Silver climbed above the US$80-per-ounce-mark for the first time before sliding sharply lower in volatile trading on Monday, while platinum and palladium also fell sharply after hitting all-time highs.
Gold eased nearly 1% but has repeatedly breached record highs this year on dollar weakness, safe-haven demand and rate cut wagers.
Charu Chanana, chief investment strategist at Saxo, said precious metals have been lifted this year by a powerful mix of rate-cut tailwinds and hedging against geopolitical and fiscal uncertainty.
“Add supply worries and the move has turned parabolic. But the late-year, near-vertical surge, especially in silver, also raises the risk of higher volatility. Near-term, the risk is technical and positioning-led.”
“The big picture, however, for precious metals still looks structurally supportive with easier rates ahead, fiscal and geopolitical unease, and ongoing diversification demand. That means any pullbacks may be seen as opportunities for long-term investors to rebuild exposure,” Chanana said.
Geopolitics was back on investors’ minds after US President Donald Trump said on Sunday that he and Ukrainian President Volodymyr Zelensky were “getting a lot closer, maybe very close” to an agreement to end the war in Ukraine.
Strong year-end for stocks
In stocks, MSCI’s broadest index of Asia-Pacific shares was 0.27% higher, hitting its highest since Oct 3 in a strong start to the last week of the year. The index has risen over 25% this year, boosted by technology stocks as AI mania firmly took hold of investors.
South Korea’s Kospi rose 1.5% to a near two-month peak, taking its yearly gains to an eye-popping 74%, on pace for its strongest annual gain since 1999. Japan’s Nikkei slipped 0.4%, while Taiwan stocks rose 0.3% to a record high.
Investor focus on the holiday-curtailed week will be on minutes of the Fed’s last meeting due on Tuesday. The US central bank cut rates earlier this month and projected just one more cut for next year while traders have priced in at least two more.
Tony Sycamore, market analyst at IG, said markets will scour the minutes for deeper insights into the committee debates on the balance of risks and the timing of future easing.
The spotlight will then switch over to labour market data expected in the new year including non-farm payrolls, Sycamore said.
“If these reports show unambiguous labour market weakness, it will increase the likelihood that the Fed cuts rates by 25bp at its January FOMC meeting.”
Frail yen finds support
The Japanese yen firmed 0.2% to 156.13 per US dollar after a slightly hawkish summary of opinions from the Bank of Japan’s policy meeting in December showed on Monday. The summary showed many board members seeing the need for further increases to the BOJ’s policy rate.
The BOJ hiked interest rates earlier this month in a well-telegraphed move but markets were left disappointed by the comments afterwards that suggested the central bank was in no rush to hike again. That weighed on the yen and raised intervention worries among traders as officials in Tokyo sent strong verbal warnings last week.
Still, the yen remains close to the 10-month low of 157.9 per US dollar it hit in November and the risk of intervention lurks as investors cut their long yen positions.
The prospect of the Fed cutting rates next year has kept the dollar under pressure, while the spectre of a new Fed Chair that may be dovish and willing to lower rates looms large.
The dollar index, which measures the greenback against six rivals, was 0.08% lower at 97.953, on track for a 9.7% drop for the year, its steepest since 2017.