The Reserve Bank of Australia’s Commodity Index in special drawing rights (SDR) declined to -3.8% in December, from a previous -1.7%. This index tracks the movements in commodity prices critical to Australia’s economy.
In related topics, West Texas Intermediate (WTI) crude oil increased above $57.50 due to potential supply concerns. Conversely, the USD/JPY pair approached near 157.00, influenced by the Bank of Japan’s cautious approach to tightening.
Silver prices rose above $74 amid Federal Reserve cut speculation and safe-haven demand. Meanwhile, GBP/USD aimed to test three-month highs as traders remained in holiday mode.
Gold Price Climb Impact
Gold prices made gains, climbing toward $4,400 due to growing expectations of a dovish Federal Reserve policy amidst geopolitical concerns. Cardano saw early New Year momentum, targeting a breakout from a falling wedge pattern.
The economic forecast for advanced countries from 2026 to 2027 suggests a potential year of solid performance. Key factors from 2025 are expected to persist, providing an optimistic outlook for the global economy.
In the crypto sector, 2025 was marked by volatility, with the adoption of AI and favourable regulatory changes in the U.S. set to influence future growth.
With markets reopening for 2026, we see strong momentum carrying over from the final quarter of 2025. The market is aggressively pricing in US Federal Reserve rate cuts, with fed funds futures suggesting a greater than 75% probability of a first cut by the March meeting. This sentiment, which built up after the Fed’s dovish pivot in November 2025, continues to be the primary driver for several asset classes.
Precious Metal Rally Expectations
This expectation of lower rates is fueling the rally in precious metals, pushing gold towards $4,400 an ounce. Historically, periods of falling real yields, like we saw during 2020, have been extremely bullish for non-yielding assets like gold and silver. We believe call options on both XAU/USD and XAG/USD remain attractive, especially as a hedge against the persistent geopolitical tensions mentioned.
In Australia, the situation is different, with the RBA Commodity Index year-over-year figures worsening to -3.8%. This reflects weakening prices in key exports like iron ore, which we saw drop below $100 per tonne for a period in late 2025. This downturn in commodity income puts downward pressure on the Australian dollar, making AUD/USD put options a strategic consideration for the coming weeks.
Energy markets are telling a story of supply tightness, with WTI crude holding above $57.50. This reminds us of the sustained production cuts by OPEC+ throughout 2025, which have kept a floor under prices despite concerns of a global slowdown. Traders should watch inventory data closely, as any unexpected drawdowns could trigger a sharp move higher, benefiting long positions in oil futures.
The interest rate differential between the US and Japan continues to dominate the USD/JPY, pushing it toward 157.00. The Bank of Japan remains cautious about tightening policy too quickly, a stance that has kept the yen weak for over two years now. As long as the Fed is only projected to cut rates modestly while the BoJ holds steady, the path of least resistance for the pair appears to be upward.
Major currency pairs like EUR/USD and GBP/USD are currently quiet, which is typical for the first trading days of a new year. Looking back at historical volatility data, we often see implied volatility in major pairs reach yearly lows during this holiday period. This presents a potential opportunity to buy straddles or strangles at a lower cost ahead of major economic data releases expected later in January.
