SINGAPORE: Asian stocks jumped to six-week highs on Monday, while the US dollar hovered near its lowest in almost three months on expectations of the Federal Reserve cutting interest rates next year, which have also sparked a fierce rally in precious metals.
Silver climbed above US$80 per ounce for the first time in volatile trading on Monday, while platinum and palladium fell sharply after hitting all-time highs.
Gold eased 0.45 per cent but has repeatedly breached record highs this year and is on track for its biggest annual gain since 1979 with a rise of over 72 per cent.
Chief investment strategist at Saxo Charu Chananavsaid 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 for precious metals still looks positive, with fiscal and geopolitical unease, and ongoing diversification demand, Chanana said.
“That means any pullbacks may be seen as opportunities for long-term investors to rebuild exposure,” she said. Geopolitics was back on investors’ minds after US President Donald Trump met Ukrainian President Volodymyr Zelenskiy for positive talks although no agreement on bringing peace to Ukraine has been reached yet.
Meanwhile, China‘s military moved army, naval, air force and artillery units around Taiwan on Monday for its “Justice Mission 2025” drills, as the island vowed to defend democracy.
STRONG YEAR-END FOR STOCKS
In stocks, MSCI’s broadest index of Asia-Pacific shares was 0.5 per cent higher in a strong start to the final week of the year.
Most Asian markets have bagged double-digit gains this year as investors shrugged off Trump‘s tariff salvos and bet on AI.
South Korea‘s Kospi rose 1.7 per cent to a near two-month peak, taking its yearly surge to an eye-popping 75 per cent, on pace for its strongest annual gain since 1999.
Japan’s Nikkei slipped 0.5 per cent on the day but is headed for an about 27 per cent increase for the year, while Taiwan stocks rose one per cent to a record high, poised for a 25 per cent annual rise.
The buoyant mood is set to continue in Europe as the region returns from Christmas and Boxing Day holidays with European futures pointing to a higher open.
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.
FRAIL YEN FINDS SUPPORT
The Japanese yen firmed 0.2 per cent 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.
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 steady at 98.13, on track for a 9.5 per cent drop for the year, its steepest since 2017.
© New Straits Times Press (M) Bhd
