Asian stock markets climbed to six-week highs on Monday, while the U.S. dollar hovered near its lowest level in almost three months. Investor sentiment was boosted by growing expectations that the U.S. Federal Reserve will cut interest rates next year, a view that has also fuelled a powerful rally in precious metals.
Silver surged above the $80-per-ounce mark for the first time in volatile trading. Platinum and palladium, however, retreated sharply after recently touching record highs. Gold slipped 0.45% on the day, but it has repeatedly set new records this year and is on track for its strongest annual performance since 1979, with gains exceeding 72%.
Charu Chanana, chief investment strategist at Saxo, said precious metals have been supported by a strong combination of anticipated rate cuts and demand for hedges against geopolitical and fiscal uncertainty. She noted that supply concerns have further accelerated the rally, particularly in silver, increasing the risk of short-term volatility driven by technical factors and positioning.
Despite potential pullbacks, the broader outlook for precious metals remains constructive. Ongoing geopolitical risks, fiscal pressures, and diversification demand continue to underpin the sector. Chanana added that any near-term declines could present opportunities for long-term investors to rebuild exposure.
Geopolitical developments also remained in focus after Donald Trump met Volodymyr Zelenskiy for talks described as positive, though no agreement to end the war in Ukraine has yet been reached. Meanwhile, China conducted large-scale military drills around Taiwan under its “Justice Mission 2025” exercise, prompting renewed regional tensions.
Strong year-end momentum for Asian stocks
Equity markets across Asia extended their gains, with MSCI’s broad Asia-Pacific index rising 0.5% in a strong start to the final week of the year. Many Asian markets are on track for double-digit annual gains as investors looked past tariff concerns and increased exposure to artificial intelligence–related growth themes.
South Korea’s Kospi jumped 1.7% to a near two-month high, lifting its year-to-date gain to around 75%, the strongest performance since 1999. Japan’s Nikkei slipped 0.5% on the day but remains on course for an annual gain of roughly 27%. Taiwanese stocks advanced 1% to a record high and are poised for a 25% rise this year.
European markets are also expected to open higher as trading resumes following the Christmas and Boxing Day holidays, with futures pointing to a positive start.
Investor attention during the holiday-shortened week will turn to the release of minutes from the Federal Reserve’s most recent policy meeting on Tuesday. While the Fed cut rates earlier this month and projected only one additional cut next year, markets are currently pricing in at least two more reductions.
Yen steadies as BOJ signals cautious tightening
The Japanese yen strengthened 0.2% to 156.13 per dollar after a slightly hawkish summary from the Bank of Japan showed that several policymakers still see the need for further rate increases. The BOJ raised rates earlier this month, but follow-up comments suggesting no urgency for additional hikes had previously weighed on the currency and revived intervention concerns.
Expectations of Fed rate cuts next year have kept the dollar under pressure, while speculation about a more dovish future Fed leadership has added to the weakness. The dollar index, which tracks the greenback against six major currencies, was steady at 98.13 and is on track for a 9.5% annual decline, its steepest fall since 2017.
