Market Report.
📉 We began the week with a sharp correction in silver and gold, which had seen spectacular rises in recent days. Among the factors were the possible change of course by the Fed and the suspension of what appeared to be an imminent US attack on Iran.
⚠️ This week’s top risks are the ECB rate decision, the BoE rate decision, and U.S. nonfarm payrolls with wage data
🌍 Global investors, both public and private, are diversifying away from U.S. dollars and U.S. Treasuries. China’s holdings of U.S. Treasury securities have fallen by about 10% in the past year, hitting their lowest level since 2008. China is now the third-largest holder of U.S. Treasuries.
🇨🇳 China now holds $682.6 billion in U.S. Treasuries. As it has reduced those holdings, China has shifted into other assets—most notably gold.
📉 Also, bond investors are diversifying away from U.S. Treasuries amid the unpredictable nature of U.S. economic policy under the current administration.
🏛️ Perceptions that the Federal Reserve’s policy is being influenced by the U.S. administration, which could lead to higher inflation and bond yields, is not helping either.
⏳ There are serious concerns over the Fed Chair’s term expiring and the potential appointment of a more dovish replacement. Worries about the continued decline of the U.S. dollar, driven by unpredictable U.S. trade policy and deteriorating relations with allies.
🥇 The asset that serves as a significant substitute for dollars, gold, has been highlighted, and their future contracts are being affected by volatility. The CME responded by raising margin requirements on several metals contracts by 2 to 4 percentage points, a move that suggests some investors are struggling to meet margin calls amid the sharp market moves.
💥 Spot gold logged its sharpest one-day drop since 1983 on Friday, falling over 9%, while silver posted its worst daily fall on record, plunging 27%.
⚖️ Meanwhile, Gold-Silver Ratio. It seems that silver’s moment of glory with its designation as a ‘critical metal’ by the USGS is losing momentum.
📰 According to Bloomberg Chinese metals traders have incurred losses totaling at least 1 billion yuan ($144 million) after a counterparty named Xu Maohua, nicknamed “The Hat”, fled the country leaving deals unfinished.
🏭 Xu was central to a network that helped the SDIC Commodities subsidiary, a unit of state-owned SDIC, boost sales through irregular deals that skirted government rules limiting state firms to trading raw materials necessary for their core operations.
🔄 The alleged scheme involved Xu selling metals that were not actually his, with many of the companies involved owned by Xu himself. This allowed SDIC Commodities to create the illusion of revenue generation through circular trading.
⚖️ The fallout includes a lawsuit against SDIC Commodities for over 200 million yuan in damages, as well as the seizure of 3,150 tons of refined copper held by the SDIC unit.
🏦 Last week, president Donald Trump named Kevin Warsh as the next Federal Reserve chair, a move that was broadly welcomed by markets. Investors took comfort in Warsh’s prior experience at the Fed from 2006 to 2011, spanning the Global Financial Crisis, and in the belief that he would maintain central bank independence rather than simply follow Trump’s wishes.
💵 Following the announcement, the U.S. dollar strengthened, signaling market approval of Warsh’s credibility and perceived autonomy, while risk assets declined.
👔 Kevin Warsh is a central bank veteran, having served on the Federal Reserve’s Board of Governors from 2006 to 2011, during the global financial crisis and the Fed’s efforts to stabilize the economy.
📜 However, Warsh emerged as a critic of the Fed’s post-crisis policies, warning that large-scale asset purchases and near-zero interest rates risked distorting markets and undermining price stability.
🔄 Warsh’s appointment would mark a shift from the pragmatic, consensus-driven approach of current Fed Chair Jerome Powell, as Warsh has advocated for “regime change” at the central bank.
🕵️♂️ But he also seems to have, like all prominent figures, a dark side. His name appears in the Epstein files that have recently been published, in connection with a “St. Barth’s Christmas” event in 2010. He also holds prominent positions in several international political structures. He is a former steering committee member of the Bilderberg Group. The son-in-law of Ronald Lauder, former president of the World Jewish Congress who served in the U.S. government, notably as Deputy Assistant Secretary of Defense for European and NATO policy during the Reagan administration.
🏢 Corporate world: Over 110 companies in the S&P 500 are set to report earnings this week, making it the busiest week of the fourth-quarter earnings season.
📊 Notable companies reporting include Amazon, Alphabet (Google’s parent), Disney, Chipotle, Advanced Micro Devices (AMD), Uber, and Eli Lilly.
✅ The earnings season so far has been strong, with 77% of companies exceeding earnings estimates and the S&P 500 on track for a fifth straight quarter of double-digit earnings growth.
👀 Investors will be watching for updates on theme park attendance at Disney, Palantir’s valuation, Chipotle’s turnaround potential, AMD’s profit margins, Uber’s growth, and Eli Lilly’s GLP-1 diabetes drug business.
🧠 For Alphabet and Amazon, the focus will be on whether they can beat expectations and provide signs of a rebound after underperforming the broader market over the past year.
🤖 Will the AI bubble burst or not?: Nvidia CEO Jensen Huang has stated that the company’s proposed $100 billion investment in OpenAI was “never a commitment” and that Nvidia will consider any funding rounds “one at a time.”
📩 In September, Nvidia had announced plans to invest up to $100 billion in OpenAI to support new data centers and AI infrastructure, as part of a letter of intent between the two companies.
📰 However, the Wall Street Journal reported that this investment plan has now stalled, after some inside Nvidia expressed doubts about the deal.
🗣️ Huang clarified that OpenAI had invited Nvidia to invest up to $100 billion, but Nvidia never made a firm commitment and will approach any potential funding “one step at a time.”
⚡ The proposed investment was intended to help OpenAI build data centers with a capacity of at least 10 gigawatts of power, equipped with Nvidia’s advanced chips for training and deploying AI models.
Geopolitics.
🛑 The possible war with Iran seems to be receding. Local analysts view the unrest in Iran as a continuation of the agenda against Venezuela, as the US seeks to control global oil flows and put consumer countries like China on a “short leash”.
🎯 While some doubt Trump wants a protracted war against Iran, they don’t rule out the possibility, given Iran’s asymmetrical means of response and the high strategic costs for the US.
🔥 There are concerns that any direct US or Israeli intervention could backfire, with Iran becoming even more hostile and extremist elements potentially seizing control.
📉 The most likely outcome is seen as increased economic and political pressure on Iran to further isolate and exhaust the country, rather than outright military action.
🛢️ Gulf countries are worried about the erosion of their image of stability if the tensions escalate, and do not want a new conflict zone in the region.
🇬🇧 British Prime Minister Keir Starmer has renewed the UK’s bid to join the European Union’s €150 billion defense fund, known as the Security Action for Europe (SAFE) program, after negotiations last year ended in failure.
💶 The UK had sought to participate in the first round of SAFE, which allows countries to apply for funding to purchase military equipment. However, the EU rejected the UK’s bid in November, with the European Commission at one point wanting the UK to pay as much as €6.75 billion to join, an amount London considered unacceptable.
🤝 Starmer has now stated that he still wants the UK to be able to participate in SAFE or other similar initiatives, arguing it makes sense for Europe as a whole to work more closely together on defense spending, capabilities, and cooperation.
🚪 Despite the previous failure, the EU has said its “door is always open” for like-minded partners, including the UK, to potentially reach an agreement on UK participation in the defense fund.
Market View.
💲 The US dollar has rebounded sharply, with the DXY index returning to the 97‑point area following the appointment of Jerome Powell’s successor. Equity markets have moved lower, with S&P 500 futures slipping below 6,900 points. Nasdaq 100 futures have fallen below 25,400 points, currently trading around 25,360.
💶 EUR/USD, which surged above 1.20 last week, has since reversed course and is now trading near 1.1860.
📉 In Europe, DAX 40 futures have also retreated, falling to around 24,425 points, while Euro Stoxx 50 futures have dropped towards the 5,900‑point level.
🛢️ The oil market has also suffered a sharp pullback, possibly reflecting a de‑escalation in tensions surrounding a potential conflict between the United States and Iran. Spot Brent crude, which exceeded $70 per barrel last week, is now trading around $65.89.
🥇 The gold market has seen an exceptionally severe correction, losing more than 20% since last Thursday, when prices topped $5,600 per ounce, with gold futures now trading near $4,536 per ounce.
₿ Bitcoin has also undergone an extremely sharp correction, falling heavily in recent hours and breaking below the $76,800 level.
