Metal Mania

Rate Cut Regime Paused

The Federal Reserve decided to leave interest rates unchanged as an improvement in the U.S. economy was considered in its decision. Federal Reserve officials noted limited job gains and a stabilization of the unemployment rate, which has supported the removal of language that pointed to increased downside risks to employment. In recent months, Federal Reserve officials focused on the trajectory of the labor market and decision-making was data dependent. Unless there’s a massive deterioration in the labor market as 2026 progresses, rate cuts will be unlikely. The other factor impacting interest rates, inflation, was “modestly positive”. Fed chair Jay Powell said the higher inflation print was a result of tariffs and is unlikely to be sustained.

Price Growth Slows, Wages Outpace Prices

Goods and services (excluding food and energy) that are paid by consumers increased 0.2% in December from a month earlier and 2.6% from a year earlier. This annual rate is the lowest level in four years, despite the stickiest component, shelter prices advancing 0.4% in December and the most since August. Sustained price growth remains unwelcome to consumers; however, wages adjusted for inflation were positive from a year earlier. Real wage growth advanced at a 1.1% rate, a positive indicator for consumer spending. Lower inflation and higher wages should be supportive for consumption habits to begin the year.

Gold and Silver in Fashion

Last year’s extraordinary rally of commodities continued into 2026, as gold prices advanced 8.82% and silver prices increased 11.56% in the first month of trading. One of the main catalysts to this parabolic move in commodities is the diversification of foreign assets into real assets. Foreign gold holdings are approaching the level of foreign ownership of U.S. treasuries at just under $4 trillion. While the increased adoption of gold hasn’t come at the expense of U.S. assets – foreign purchases of U.S. stocks and bonds has increased – commodities are becoming a more attractive place to store reserves as the U.S. dollar continues to weaken.

Metal Prices in January 2026: Growth of $100

Rates Shift Higher

The 10-year Treasury yield rose 0.06% to a level of 4.23% to begin 2026, as economic data and Kevin Warsh’s appointment as the next Fed Chairman brought certainty to the economy. Treasury bonds at all maturities increased last month, underlining the improved economic conditions. As a result, bonds with higher credit risk exhibited a strong month, returning 0.51%, compared with a 0.11% return for bonds that have a lower credit risk. Bonds with higher credit risk typically follow the success of equity markets. Any upside in equity markets should be a positive catalyst for those bonds.

Weaker Dollar Supports International Stocks & Small-Caps Spike

International stocks, led by emerging markets, took the early lead in 2026, as a weaker dollar made those markets more attractive to U.S. investors. The S&P 500 index advanced 1.4%, while the MSCI EAFE, a representation of international developed stocks, rose 5.02% and the MSCI Emerging Market index jumped 8.9%. Investors have gravitated towards emerging markets as their markets have turned more technology focused, without the expensiveness exhibited in U.S. markets. Small-cap stocks in the U.S. advanced more than 5% on an improvement in its earnings outlook. The decline in interest rates over the past year, cheaper valuation, and a broadening of earnings across Corporate America have been the catalysts.

 

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