Written by Relief and anxiety
Precious metals plunged on Thursday, pulling away from their recent highs, as geopolitical risks subsided somewhat amid heightened tensions over Iran and Greenland, as well as the ongoing uncertainty about Venezuela’s future. With the US president starting 2026 in a combative mood, it didn’t take long for Trump to divert his attention to Iran and Greenland soon after the short and effective intervention in Venezuela.
On the plus side, there don’t appear to be any plans for further military operations in Venezuela, and the US has already started selling the country’s oil, adding oil futures to the list of commodities that are sliding today.
More importantly, though, Trump appears to have backed away from taking immediate action in Iran, after being reassured by “very important sources on the other side” that the killing of anti-government protesters has stopped and planned executions have been postponed.
Gold, silver and oil retreat, for now
Still, the situation remains very fragile as Tehran may just be attempting to buy some time and US bases in the region are on high alert. But for now, the positive development has triggered a selloff in the safe-haven precious metals that had soared since the start of the year amid the build up of geopolitical frictions.
Gold has fallen to around the $4,600 level after yesterday scaling a new record of $4,642.72. Silver, which already boasts year-to-date gains of 25%, has nose-dived by more than 3% from yesterday’s all-time high to just below the $90 level. Platinum and palladium are also down today.
News that Trump has put off a decision on imposing import tariffs on silver, platinum and palladium further added to the selling pressure as investors had rushed to stock up on these metals.
WTI oil, meanwhile, has slipped to around $60 from 12-week highs reached yesterday.
Trump has eyes set on Greenland
But apart from the strong possibility that Iran may resume the killings at some point, angering Washington, investors also have to contend with Trump’s unwavering ambition to bring Greenland under American control.
Talks yesterday between Danish, Greenlandic and US officials didn’t go too well, with Trump insisting that “anything less” than US control of Greenland is “unacceptable”, although there was an agreement to establish a working group to continue efforts for a solution.
The elevated risks over both Iran and Greenland explain why gold’s selloff has been modest. Nevertheless, the headlines have helped spur a decent rebound in risk appetite today.
Mood improves in equity markets, more bank earnings due
Global equities are mostly positive, with US futures turning green after yesterday’s drop. The Q4 earnings season hasn’t gotten off to the best of starts, as the major Wall Street banks reported mixed results.
The timing of Trump’s proposal to cap the interest rate paid on credit cards couldn’t have come at a worse time. The long wait for the US Supreme Court’s decision on the legality of Trump’s tariffs is also holding back sentiment slightly, as the tariff case was not included in Wednesday’s rulings announced by the court, as had been speculated.
It will be the turn of Goldman Sachs and Morgan Stanley to publish their earnings today. In the meantime, small caps are outperforming and chip and AI stocks are rising in pre-market trade, buoyed by better-than-expected earnings and a positive outlook by Taiwan Semiconductor Manufacturing Company.
Stronger-than-expected retail sales data out of the US yesterday is also lifting the mood. Moreover, there is relief that Trump has no plan to fire Fed Chair Jerome Powell despite the Justice Department investigation he ordered into the renovation costs of the Fed’s headquarters, following comments made in a Reuters interview.
The focus later today will be on the weekly jobless claims.
Dollar holds firm even as yen attempts a recovery
Ahead of that, the US dollar is trading flat against a basket of currencies, holding firmly near one-month highs during the past few sessions.
Expectations of 50-basis-points of Fed rate cuts in 2026 have barely budged during January amid all the conflicting data on the economy, hence the dollar’s broader lack of direction.
But against the yen, which has been under pressure lately, the greenback is retreating from yesterday’s peak of 159.45, following hints by BoJ Governor Kazuo Ueda earlier today that further rate hikes are likely. An intensification of verbal intervention by Japanese officials is also helping the yen rebound. However, it’s hard to see the upside lasting too long if Prime Minister Sanae Takaichi calls a snap election as expected that could increase her LDP party’s majority in parliament, allowing her to press ahead with more fiscal stimulus.
The pound was little changed on upbeat UK GDP numbers for November.
By XM.com
