Last week, global financial markets exhibited a significant divergence, with the Federal Reserve's interest rate cut becoming the core catalyst for market volatility. The target range for the federal funds rate was lowered to 3.50%-3.75%, marking the largest internal policy divergence in six years and signaling a critical turning point in monetary policy.

The past week's global financial markets presented investors with a complex picture of divergence and contradictions. The Fed cut rates amid disagreement, stock markets fluctuated, currency markets shifted between strength and weakness, precious metals rallied on breakouts, and crude oil struggled amidst oversupply. This comprehensive market divergence reflects both deep-seated structural problems in the global economy and provides abundant opportunities for prepared investors. Investors need to adopt more flexible and diversified allocation strategies.

In this era of uncertainty, the only certainty is uncertainty itself. But as Buffett said, "Be greedy when others are fearful, and fearful when others are greedy." The current market divergence and volatility create rare opportunities for value investors. Those investors who can remain rational, adhere to value investing, and control risk will ultimately reap rich rewards in this market transformation.

Looking ahead, I believe that as the global economy gradually emerges from the shadow of the pandemic, the new technological revolution will bring new growth momentum, and reasonable asset allocation and carefully selected investment targets will help investors achieve steady wealth growth. In this process, maintaining a learning mindset, adhering to independent thinking, and effective risk management will be essential qualities for every investor.

Last Week's Market Performance Review:

Last week, US stocks declined overall as funds continued to flow out of technology stocks and into value sectors. Although the Dow Jones and Russell 2000 indices briefly hit record highs, the significant decline in technology stocks dragged down the market, indicating that the market is becoming more cautious about AI trading in a high-level environment. However, many institutions still believe that this correction is more of a phase of rotation than a trend reversal. Major U.S. stock indexes all declined: the S&P 500 fell 1.07% to close at 6,827.41; the Nasdaq Composite dropped 1.69% to 23,195.17; the Dow Jones Industrial Average, after hitting a record high during the session, retreated, ultimately falling 245.96 points, or 0.51%, to close at 48,458.05; and the Russell 2000, representing small-cap stocks, fell 1.51% to close at 2,551.46, though it also hit a record high during the trading session.

Amid the Federal Reserve's response to overly hawkish market bets and strengthened expectations of further rate cuts next year, spot gold prices held steady near a seven-week high last week, breaking through the key $4,300 level. Gold prices climbed further on Thursday after hitting their highest level since October 21, reaching a high of $4,353.60. Spot gold rose 2.31% last week, closing at $4,300.

During the US session last weekend, spot silver experienced a sudden plunge of over 4% from a high of around 64.660, breaking through the lower edge of its trading range. It then quickly stabilized at the 61.000-61.250 support level and rebounded slightly to around 61.600. Silver's weekly gain last week reached approximately 10%, pushing its price more than double from the beginning of the year.

Last week, the global foreign exchange market presented a complex picture amid the interplay of major central bank policy expectations and economic data fluctuations. Overall, the market is recalibrating its pricing of major currencies based on dovish signals from the Federal Reserve, interest rate paths of other central banks, and the latest economic fundamentals. Despite a slight technical rebound in the US dollar index on Friday, closing at 98.40, it still fell 0.6% for the week, marking its third consecutive weekly decline. Year-to-date, the dollar index has fallen by more than 9%, on track for its largest annual drop since 2017.

The euro performed steadily against the dollar last week, exhibiting a fluctuating upward trend. Supported by a weakening dollar, the euro reached a more than two-month high on Thursday. On Friday, the euro was essentially flat against the dollar around 1.1737, gaining 0.85% for the week, marking its third consecutive weekly gain. The dollar/yen pair experienced a volatile week, initially rising due to a brief dollar rebound and risk appetite. However, as market attention shifted to the Bank of Japan's interest rate decision next week, rising expectations of a rate hike provided support for the yen, pushing the dollar/yen pair lower. For the week, the yen appreciated by approximately 0.31% against the dollar to around 155.80.

The pound/dollar pair experienced a rollercoaster ride last week. Before midweek, the pound sterling fluctuated upwards against a backdrop of generally weakening US dollars, reaching a seven-week high in the latter half of the week. However, unexpectedly weak UK GDP data released on Friday caused the pound to fall back, erasing most of its intraday gains. Ultimately, the pound still closed the week slightly higher against the dollar, up 0.29% to around 1.3368, but its upward momentum was clearly hampered. The Australian dollar/US dollar pair stalled last week after three weeks of gains, having reached a three-month high of 0.6686 on Wednesday. In the early European trading session at the weekend, the Australian dollar pair traded steadily around 0.6660. The pair struggled to maintain its upward momentum after the release of unexpectedly weak Australian labor market data for November, closing the week at 0.6650, a slight increase of 0.18%.

Over the weekend, the international oil market was again dominated by pessimistic expectations of oversupply, and despite frequent geopolitical events, oil prices failed to reverse their downward trend. Both major oil benchmarks trended downwards throughout the week, recording significant drops of over 4%, continuing their recent weakness. Market focus quickly shifted from geopolitical risks back to fundamentals, with ample global oil supply becoming the core force suppressing prices. WTI crude oil closed the week at $57.28, down 4.37%.

Last week, Bitcoin continued to consolidate around $92,000 after significant mid-week volatility. Downward pressure on Bitcoin is easing, but the market is not entirely out of the woods. Bitcoin rebounded after a sharp sell-off, regaining the $93,000 mark shortly after the US stock market closed. After the Fed's rate cut on Wednesday and a sharp drop in US stocks at the open, Bitcoin briefly fell to $89,000. It is currently trading around $92,000, up slightly in the past 24 hours. Bitcoin has struggled in the fourth quarter, having failed to break through the $125,000 mark earlier in the quarter. During this period, Bitcoin and the US dollar exhibited a somewhat inverse relationship: as the dollar broke upwards from a descending wedge and continued to strengthen, Bitcoin's sell-off intensified, with a maximum drop of 36.22%, until buying interest emerged above $80,000.

The yield on the 10-year US Treasury note rose to 4.2%, its highest level since early September, as some Federal Reserve officials expressed concern about further rate cuts. On the other hand, Philadelphia Fed President Paulson made more dovish comments, noting that her concerns about a weak labor market were slightly greater than her concerns about inflation. Meanwhile, Goolsby and Schmid will step down. These comments came after the Fed cut rates for the third consecutive time by 25 basis points and predicted only one more rate cut in 2026.

Market Outlook for This Week:

This week (December 15-19), global markets will see a flurry of US non-farm payroll data releases and policy decisions from various countries.

The main theme in the current foreign exchange and interest rate markets remains the same: will the market repric the pace of rate cuts (or hikes) by major central banks, using a faster or slower path? While the Federal Reserve's December policy meeting has concluded, it didn't provide a one-sided answer, instead bringing "disagreements" to the forefront, putting pressure on the dollar after the decision.

Due to the earlier US government shutdown, core economic data for October and November were released in a concentrated manner. This, coupled with the interest rate decisions of the Bank of England, the European Central Bank, and the Bank of Japan, and the release of economic fundamentals data from China, the US, Europe, Japan, and other countries, means that every event—from consumption and industrial output to inflation and employment, from monetary policy to industry summits—could potentially trigger significant asset price volatility. The combined effect of data and policy signals likely increases volatility. Trading logic needs to shift from "guessing the direction" to "monitoring expectation gaps and path guidance": whether the outcome meets expectations is only the first step; whether policy statements and future paths cause a shift in pricing will determine how far the market can go.

Investors need to focus on core variables and prepare their positions in advance to cope with potential market changes.

Regarding risks this week:

Risk Warning: In addition to core economic data and central bank decisions, investors should be wary of four potential risks:

First, weaker-than-expected non-farm payrolls and retail sales data may cause market concerns about the US economy, which would be beneficial for gold and detrimental to the US dollar.

Second, major central bank decisions or official speeches may release unexpected policy shift signals, quickly correcting market pricing.

Third, renewed escalation of international geopolitical or trade frictions could suppress global risk asset sentiment.

Fourth, during the rollover period for crude oil contracts, tightening liquidity may lead to short-term price fluctuations, requiring strict control of trading risks.

This Week's Conclusion:

The importance of US data this week lies in its potential to determine whether the "employment first" policy will be further strengthened. The November non-farm payrolls report, delayed due to the shutdown, will be released on Tuesday.

If non-farm payrolls are significantly weaker, the interest rate market could easily shift its pricing of "two rate cuts next year" to an earlier timeframe, and the US dollar would be more likely to continue its weakness. In contrast, even if inflation data shows some stickiness, its marginal support for the US dollar may be less than before, as the current focus is more on the labor market. As mentioned at the press conference, the "overshooting" of the 2% inflation target is largely related to tariff factors and may be closer to a "one-off price increase," which would reduce the market's sensitivity to a single upward movement in inflation data.

Therefore, the more likely order of events is: non-farm payrolls first determine the direction, then inflation determines the magnitude and depth of the pullback. In addition, the preliminary December Purchasing Managers' Index will be released on Tuesday, and November retail sales will be released on Wednesday. These two data points can help assess the resilience of demand and economic momentum, but their impact on the interest rate path is likely to be less significant than non-farm payrolls and inflation.

The Fed's $40 billion bond-buying program shakes the world; Powell bluntly states that a rate hike is unlikely?

Last week, after a two-day policy meeting, the Federal Reserve announced a rate cut, but simultaneously released cautious signals, suggesting that there might only be one rate cut in 2026, which contrasts sharply with some market expectations. Fed Chairman Powell emphasized at the press conference that the next step is unlikely to be a rate hike, but rather a flexible adjustment based on economic data. At the same time, the Fed also launched technical bond-buying operations to maintain market liquidity. These decisions not only reflect the Federal Reserve's close attention to the job market and inflation, but also triggered a wide market reaction, including a rise in stocks, a weaker dollar, and a decline in Treasury yields. The following will analyze the details and impacts behind this series of events in detail.

The Fed's new projections (dot plot) show that policymakers' median expectation is only a 25 basis point rate cut in 2026, consistent with their September projections. They expect inflation to slow to around 2.4% by the end of next year, economic growth to accelerate to above-trend levels at 2.3%, and the unemployment rate to remain at a moderate level of 4.4%.

These data suggest that the Fed is seeking clearer signals from the job market, while believing that inflation remains somewhat high, and therefore tends to pause further reductions in borrowing costs. He added that Fed officials have not yet decided how to handle interest rates at their next meeting at the end of January; monetary policy is not a predetermined path, but will be decided based on the latest data from each meeting. This cautious stance allows the market to perceive the Fed's flexibility, while also avoiding giving clear guidance in case of unexpected fluctuations in economic data.

At the press conference following the interest rate decision, Chairman Powell repeatedly emphasized that the Federal Reserve's interest rate policy was well-positioned and that it could observe how the economy developed.

Chairman Powell stated that Fed officials had not yet decided how to handle interest rates at the next meeting at the end of January, and that monetary policy was not predetermined but would be decided based on the latest data from each meeting. This cautious stance conveyed the Fed's flexibility to the market while avoiding explicit guidance in case of unexpected fluctuations in economic data.

Following the Fed's decision, major U.S. stock indices closed higher, the dollar weakened against a basket of currencies to a near one-and-a-half-month low, and Treasury yields fell, recording their largest single-day drop in nearly two weeks, with an overall optimistic market sentiment.

However, other analysts pointed out that policymakers had differing views on the interest rate outlook. They described it as a "hawkish rate cut" because the dot plot showed that six policymakers believed a rate cut was unnecessary at this time, setting the appropriate interest rate for the end of 2025 at 3.9%.

Following the Federal Reserve's prediction of only one rate cut in 2026, the US interest rate futures market reacted quickly, increasing the probability of a pause in easing at the January policy meeting from 70% to 78%. Although the Fed's median forecast is only a 0.25 percentage point rate cut, the futures market still expects two rate cuts in 2026, bringing the federal funds rate down to 3.0%.

Overall, the Fed's decision balanced rate cuts with caution, emphasizing data-driven rather than predetermined paths. Against the backdrop of high inflation and stable employment, the signal of only one rate cut in 2026, while conservative, has injected confidence into the market. Looking ahead, with more data releases and potential geopolitical factors, the Fed's policy direction remains uncertain, and investors need to pay close attention to grasp the pulse of the global economy.

The Fed's rate cut led to a weaker dollar, which is expected to maintain a downward trend in the short term.

Last week, the Fed lowered interest rates to the expected range of 3.50%-3.75% and released a dovish signal of "observing the economy," weakening market expectations for future tightening policies and putting pressure on the dollar. The market currently estimates a 78% probability of interest rates remaining unchanged next month.

As expected, the Federal Reserve cut its policy rate by another 25 basis points to a range of 3.50%-3.75%, marking the third rate cut since September. While the rate cut itself had been largely priced in by the market, the policy statement and guidance on the future interest rate path were noticeably dovish, further diminishing the dollar's interest rate advantage.

Fed Chairman Powell stated that the market is in a good position to observe how the economy evolves, and that future rate hikes are not the baseline scenario. This statement reinforced market expectations that the Fed will pause its actions, putting further downward pressure on the dollar index.

The Fed's latest economic projections show that officials expect only one rate cut next year, consistent with their September forecasts, but the overall wording leans towards a wait-and-see approach. This guidance has been interpreted by the market as more dovish, further weakening the dollar.

Overall, the current weakness of the dollar index is a result of both "rate cut expectations" and a more dovish policy tone. A short-term rebound may depend on support from economic data. Only a firm hold above the 100.00 level could reverse the current weak trend.

Market View:

From a longer-term perspective, the US dollar index in 2025 exhibits a complex pattern of "first falling, then rising, then falling again." The year-to-date decline has exceeded 8%, primarily concentrated in the decline from the beginning of the year to mid-September. The rebound from mid-September to mid-November was essentially a technical correction of the previous sharp decline. The current decline may mark the beginning of a new medium-term downtrend.

Gold Price Bullish Momentum Continues; Second Wave of Surge Hides Hidden Clues?

Last week's Federal Reserve meeting concluded, with the metals sector emerging as the biggest winner. Gold prices broke through the previously formed "bull market flag" pattern and are currently gradually approaching the historical high of $4,381 reached last October, demonstrating ample upward resilience. Following the Fed's policy implementation, gold prices strengthened further, consolidating the bull market trend. Considering the gold market's performance over the past two years, the bull market foundation remains solid, and it may even challenge higher prices in 2026.

The continued upward trend in the gold bull market is primarily driven by the deep alignment between the Federal Reserve's policy direction and market expectations. Even though the Fed meeting last week was slightly more hawkish than expected, market expectations for further easing policies remained strong, directly translating into upward pressure on gold prices. The turning point in this trend can be traced back to past policy signals: in December 2023, the Fed first signaled a rate cut in 2024, and gold prices successfully broke through the key resistance level of $2,000/ounce, which had suppressed its upward movement for the previous three and a half years, officially initiating a new round of upward movement.

In addition to policy expectations, the continued accumulation of gold by central banks around the world has become an indispensable "ballast" for the gold market. With the continued entry of central banks as "core buyers," the stability of the current gold bull market trend is beyond question. Furthermore, the news two weeks ago that Trump intended to appoint Hassett, a moderate, as the Federal Reserve Chair further strengthened market expectations for easing policies—Hassett has historically held a dovish stance, and Trump has stated that interest rate cuts are an important criterion for appointing the Fed Chair, which undoubtedly adds more confidence to the gold bull market.

The continued pressure on the US dollar index further benefits gold prices from an exchange rate perspective, and is even a clear buy signal. The weak dollar further enhances the trading appeal of gold, becoming an important auxiliary factor driving gold prices upward.

From a market performance perspective, gold prices have achieved nearly two years of continuous growth, and 2025 is expected to be a bumper year for gold bulls. Gold futures on the New York Mercantile Exchange have risen by approximately $1,700 this year, potentially setting a new historical high for the same period. The long-term price chart for gold has shown a parabolic upward trend, with the monthly chart showing an almost linear upward movement. This characteristic indicates that this multi-year bull market has entered an acceleration phase. It's worth noting that the final acceleration phase of a commodity bull market is often accompanied by a sharp surge, providing room for speculation regarding gold's future price movement.

For market participants, gold remains in a strong bullish trend, with upward momentum continuing to accumulate. Core supporting factors such as central bank gold purchases and expectations of easing policies have not fundamentally changed, and the technical indicators also confirm the continuation of the bull market trend. Short-term pullbacks can be seen as "buying on dips," which is the core operational strategy in the current market environment.

However, it is crucial to remember that there is no absolute certainty in the market, and one should not bet all funds on such price predictions. In practice, it is essential to pay close attention to the effectiveness of the $4,250-$4,200 support level, while closely monitoring the Federal Reserve's policy moves and the silver market's performance to manage potential pullback risks and avoid misjudging market trends based on a single signal.

The Federal Reserve cut interest rates as expected; the dollar and Treasury yields fell sharply; silver prices hit a new record high.

The Federal Reserve cut interest rates by 25 basis points to 3.50%-3.75% last week as expected, but signaled a "pause in dovishness" due to serious internal divisions (a 10-3 vote and only one rate cut reserved for 2026). Following the decision, the dollar index plummeted 0.6%, the 10-year Treasury yield dropped 0.88%, and silver surged to $64.660 per ounce, setting a new record high, with a cumulative increase of 115% this year. Increased geopolitical risks and explosive industrial demand are driving a new round of super bull market for precious metals.

The strength of silver is driven by a combination of expanding demand, tightening inventory structure, and policy expectations. Growth in industrial demand remains the core factor, with high consumption of silver in sectors such as photovoltaics and electronics, resulting in a persistent supply gap. Looking at the latest exchange warehouse receipts, while total silver inventories have increased slightly, silver's inclusion in the US critical minerals list has fueled market speculation about potential future strategic reserve demand, significantly strengthening market sentiment. A well-known analyst noted that the current fundamentals for silver "remain in an extremely positive phase," with a significant tailwind effect from the supply and demand structure.

On the other hand, against the backdrop of a weakening dollar and US Treasury yields, spot silver performed even better, breaking through and holding above the $61 mark, reaching a high of $64.320 per ounce, a new historical record.

Compared to the November statement, the Fed added a new sentence: "In considering any further adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks." This wording has historically appeared on the eve of a pause in rate-cutting cycles and is seen by the market as a clear signal that the Fed is about to enter a period of observation.

Silver has risen 115% year-to-date, far exceeding gold's 35% performance, mainly due to:

1. Continued explosive growth in industrial demand from sectors such as photovoltaics, artificial intelligence data centers, and electric vehicles;

2. Stagnant global mine supply growth, with the remaining mining lifespan reduced to less than 20 years;

3. The US government officially added silver to its "critical minerals" list, significantly enhancing its strategic value.

On the other hand, geopolitical risks continue to escalate; Russian Foreign Minister Lavrov stated that the problem cannot be resolved smoothly without addressing its root causes in Ukraine, and warned of preparedness for hostile actions such as troop deployments or asset seizures from Europe. US President Trump publicly criticized Zelenskyy, saying he "must be realistic," and called for Ukraine to hold elections as soon as possible and end the war. Geopolitical uncertainty continues to provide potential support for silver.

Summary and Outlook:

In the short term, the Fed's "pause in dovishness" has significantly cooled market expectations for a rate cut in January next year. The dollar's decline may slow temporarily, and silver's upward momentum may weaken. A risk of a pullback from high levels should be noted. Investors need to pay attention to further market interpretations of the Federal Reserve's decision and monitor changes in market expectations regarding the Fed's monetary policy.

In the medium to long term, if the labor market continues to cool or inflation unexpectedly declines, the conservative forecast of only one rate cut in 2026 will likely be revised downwards, thus opening up greater upside potential for precious metals. Silver, in particular, with its combined industrial and safe-haven attributes, may see its historical highs merely the beginning of a new supercycle.

Overview of Important Overseas Economic Events and Matters This Week:

Monday (December 15): Japan's Q4 Tankan Outlook for Large Non-Manufacturing Industries; US December New York Fed Manufacturing Index; Canada November Unadjusted CPI MoM (%)

Tuesday (December 16): Australia's ANZ Consumer Confidence Index for the week ending December 14; UK October Unemployment Rate - by ILO Standard (%); Eurozone December SPGI Manufacturing PMI (Preliminary); UK December SPGI Services PMI (Preliminary); Eurozone December ZEW Economic Sentiment Index; US November Non-Farm Payrolls (Seasonally Adjusted, in thousands); US November Unemployment Rate (%); US October Retail Sales MoM (%); US December SPGI Manufacturing PMI (Preliminary)

Wednesday (December 17): Japan's November Goods Trade Balance - Unadjusted (billion yen); UK November CPI YoY (%); UK November Retail Price Index YoY (%); Eurozone November Harmonized CPI YoY - Final Unadjusted (%); US EIA Crude Oil Inventory Change for the Week Ending December 12 (in thousands of barrels); Bank of Canada Governor Macklem Speaks

Thursday (December 18): US November Core CPI YoY (Unadjusted) (%); US Initial Jobless Claims for the Week Ending December 13 (in thousands); Bank of England Interest Rate Decision and Meeting Minutes; European Central Bank Interest Rate Decision; ECB President Lagarde Holds Monetary Policy Press Conference

Friday (December 19): Japan November National CPI YoY (%); UK December GfK Consumer Confidence Index; UK November Seasonally Adjusted Retail Sales MoM (%); US Q3 Real GDP Annualized Quarterly Rate Revised (%); US October PCE Price Index YoY (%); Eurozone December Consumer Confidence Index Preliminary Reading; The final reading of the University of Michigan Consumer Sentiment Index for December in the United States; the Bank of Japan announces its interest rate decision; Bank of Japan Governor Kazuo Ueda holds a press conference on monetary policy.

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