Gold & Silver's Record Rally Hits a Wall

U.S. President Donald Trump has named a high-profile team to a new Gaza "board of peace," appointing Secretary of State Marco Rubio and former British Prime Minister Tony Blair as founding members.

The move establishes a core leadership group intended to guide the next phase of a U.S.-backed plan to end the conflict in the region.

High-Profile Appointments to Founding Executive Board

The White House on Friday confirmed the seven-member "founding executive board." In addition to Rubio and Blair, the board includes:

• Steve Witkoff, Trump’s special envoy

• Jared Kushner, the president's son-in-law

• Ajay Banga, President of the World Bank

President Trump will personally chair the board, which he described on Thursday as the "Greatest and Most Prestigious Board ever assembled at any time, any place." The White House stated that additional members will be announced in the coming weeks.

The inclusion of Tony Blair is a controversial choice in the Middle East, given his role in the 2003 invasion of Iraq. President Trump previously noted last year that he wanted to ensure Blair was an "acceptable choice to everybody."

A Key Step in the US-Backed Gaza Peace Plan

The board's formation marks a key development in the second phase of a comprehensive peace plan for Gaza. The initiative, which first came into force on October 10, led to the return of all hostages held by Hamas and an end to the fighting between the militant group and Israel.

This new board is designed to oversee the long-term stabilization efforts following the initial ceasefire.

Parallel Efforts to Stabilize Post-War Gaza

The board's creation coincides with two other major stabilization initiatives. A 15-member Palestinian technocratic committee was recently announced to manage the day-to-day governance of the devastated territory. This committee will be headed by Ali Shaath, a Gaza native and former Palestinian Authority deputy minister.

On the security front, U.S. Major General Jasper Jeffers was named to lead the International Stabilization Force (ISF) in Gaza.

Peace Process Faces Ongoing Hurdles

While the plan's second phase is now underway, it is clouded by serious challenges. Allegations of aid shortages and ongoing violence continue to undermine progress on the ground.

Furthermore, a critical obstacle remains unresolved: Hamas has refused to publicly commit to full disarmament, which Israel considers a non-negotiable demand for lasting peace.

A surge in Japanese stocks, ignited by Prime Minister Sanae Takaichi's call for a snap election, is gaining momentum. But investors should be cautious: the very policies fueling the rally could ultimately undermine it if she wins, leading to higher inflation and rising government borrowing costs.

This week, Japan's Topix index jumped over 4% in its strongest rally since July, reviving the "Takaichi trade"—a strategy of buying stocks in anticipation of a massive government spending boost. Takaichi is betting that an election will consolidate her power, giving her a clear mandate to pursue pro-stimulus policies.

The Lure of Stimulus: A Bet on Abenomics 2.0

Investors see Takaichi potentially following the playbook of her mentor, Shinzo Abe, Japan's longest-serving prime minister. Abe's stimulus-heavy "Abenomics" program was a major driver of asset prices from 2012 to 2020.

Takaichi has already signaled her priorities for strategic investment, targeting key industries such as:

• Artificial intelligence

• Semiconductors

• Defense

• Space

• Content industries

This prospect of a government-backed capital expenditure boom has investors excited. Neil Newman, head of strategy at Astris Advisory Japan, predicts that a Takaichi victory could drive another 5% climb in the Nikkei 225 Stock Average. "With the government planning to invest strategically in key industries, we're likely to see a capex boom," he said.

Warning Signs Flash for the Yen and Inflation

While stocks are rallying, the bond market is sending a different signal. Investors are already demanding higher premiums to hold Japanese government debt, a move that contrasts with falling yields globally.

"Clearly, going by rising break-even inflation rates, the market is expecting slightly looser, more inflationary policies in the aftermath of the elections," noted Aninda Mitra, head of Asia macro and investment strategy at BNY Investments. He added that the market sees inflation remaining "higher-for-longer above the Bank of Japan's target."

The biggest immediate risk, however, is the yen. The currency slid to 159.45 per dollar on Wednesday, an over-a-year low. On a trade-weighted basis, it has fallen to its weakest point since 1992.

This sharp depreciation is intensifying inflation concerns. A weaker yen traditionally supports exporter stocks, but its current slide threatens to destabilize the economy. Takaichi's preference for a dovish monetary policy is seen as limiting the Bank of Japan's ability to raise interest rates, putting further pressure on the currency.

"I think the biggest risk for Takaichi is the yen," said Chisa Kobayashi, Japan equity strategist at UBS SuMi TRUST Wealth Management. "If it weakens further, that could fuel inflation, undermine consumer spending and ultimately hurt voter support."

An Uncertain Political Outcome

Despite Takaichi's strong approval ratings, an easy victory is no longer a certainty. The political landscape recently shifted after Komeito—formerly a junior coalition partner of the Liberal Democratic Party—moved to align with the main opposition.

This development makes the election outcome difficult to predict, according to Shinichi Ichikawa, a senior fellow at Pictet Asset Management Japan.

However, he believes one trend is clear regardless of who wins. "The only certainty is that both sides will have little choice but to campaign on aggressive spending to win over voters," Ichikawa said. This suggests that fiscal expansion is on the horizon, but the market's initial optimism could face a reality check as the economic consequences unfold.

“The president is very much using the markets as a scorecard right now, and that scorecard — from the president’s point of view — says he’s winning,” said Mark Malek, chief investment officer at Siebert Financial. “This would all certainly prompt the administration to try to extend its winning streak by going deeper into that section of the playbook that it hasn’t up until now. In other words, expect the unexpected.”

“Investors have been so well-rewarded to ignore geopolitical risks that at this point, they will need to see something incredibly tangible to shake their confidence,” said Peter Atwater, founder of Financial Insyghts.

Source: Bloomberg

While silver has been a hot topic among investors lately on Western social media, “it’s really speculators in China that have been the main engine,” said Ole Hansen, head of commodity strategy at Saxo Bank AS. “We see that through exploding trade volumes in industrial metals and the elevated premium traders there are prepared to pay for silver over London.”

Still, the unpredictable nature of Trump’s policymaking “suggests that the practice of keeping metal onshore in the US to back short futures positions is likely to persist,” consultancy Metals Focus said in a note.

Source: Bloomberg

The race to lead the Federal Reserve has a new frontrunner, and markets are already reacting. Former Federal Reserve Governor Kevin Warsh is now the leading candidate to be the next Fed chair, a development that could signal a less aggressive path for interest rate cuts compared to his main rival.

Warsh’s odds in betting markets surged on Friday after President Donald Trump suggested he prefers to keep National Economic Council Director Kevin Hassett, previously seen as the top contender, in his current role. Speaking at a White House event, Trump praised Hassett's television performance, adding, "I actually want to keep you where you are if you want to know the truth."

Following the president's comments, Polymarket odds for Warsh winning the nomination jumped to 60%, while Hassett's chances fell to just 15%. This shift has significant implications for monetary policy, the economy, and the central bank's independence.

Former Federal Reserve Governor Kevin Warsh is now viewed as the leading candidate to be the next Fed chair.

Two Contenders, Two Visions for the Fed

The selection of the next Fed chair is critical. Current Chair Jerome Powell's term expires in May, and his successor will inherit control over the federal funds rate, which influences borrowing costs across the entire economy. Both Warsh and Hassett have publicly advocated for lower interest rates, but their approaches and allegiances appear to differ.

Kevin Hassett: The Aggressive Rate-Cutter

Hassett has often aligned with President Trump in calling for steep cuts to interest rates. This has led many analysts to view him as the candidate most likely to push the central bank to follow the White House's policy preferences.

"In our view, Hassett would likely bring the greatest risk of politicization at the Fed," wrote David Seif, chief economist at Nomura, in an October commentary. "Hassett is widely viewed as a Trump loyalist and has consistently supported the president as an advisor in both his first and second terms."

Kevin Warsh: A More Measured Approach?

Warsh, a lawyer and banker, has also supported rate cuts. "We can lower interest rates a lot," he stated on Fox News in October.

However, many economists believe he may be less "dovish"—or inclined toward rate cuts—than Hassett. "Although Warsh has argued for lower rates recently, we do not view him as structurally dovish," noted Matthew Luzzetti, chief economist at Deutsche Bank, in a December analysis. This suggests Warsh might take a more independent stance once in office.

Financial markets seem to agree. Treasury yields rose slightly on Friday as Warsh's odds improved, indicating that investors believe interest rates may remain higher under his leadership than under Hassett's.

The New Chair's High-Stakes Balancing Act

Whoever takes the helm at the Fed will face a challenging economic environment, provided they are confirmed by the Senate. The central bank's 12-person policy committee is currently divided on the best course of action.

The core dilemma is a slowing job market pulling against stubbornly high inflation. The weakening labor market calls for rate cuts to stimulate growth, while inflation running above the Fed's 2% annual target argues for keeping rates higher for longer.

Under Jerome Powell, the Fed has already cut rates by three-quarters of a point over its last three meetings—a pace slower than President Trump has demanded. With the Federal Open Market Committee (FOMC) widely expected to hold rates steady at its next meeting, whether more cuts are coming this year remains an open question.

Navigating Political Pressure and Fed Independence

The next chair won't just be managing the economy; they'll be defending the institution itself. President Trump's demands for rate cuts and his administration's criminal investigation into committee members have raised serious concerns about the central bank's independence from political influence.

Economists have long warned that if the public begins to doubt the Fed's commitment to controlling inflation, that belief could become a self-fulfilling prophecy. To counter this, the new leader may feel pressure to resist cutting rates simply to prove the Fed's credibility.

"Regardless of President Trump's choice, the market could look to test the next Fed chair's independence and the credibility of his commitment to achieving the inflation target," Lutezzi wrote. "These bona fides always need to be earned by an incoming chair."

The Trump administration is ready to implement a temporary 10% tax on all imports if the Supreme Court strikes down the emergency tariffs imposed in 2025, a top White House official confirmed.

"We can put a 10pc tariff right away to make up most of the room, and then use things like the 301 authorities, the 232 authorities, to backfill the things that we've already achieved," Kevin Hassett, director of the White House National Economic Council, told Fox Business on Friday.

This statement is the clearest confirmation yet of the administration's contingency plan as it awaits a crucial legal decision. While expressing confidence in their legal standing, officials are actively preparing a fallback strategy.

The Supreme Court announced it may issue a decision in a pending case on January 20 at 10 a.m. ET. This could be the moment the court rules on the tariff case, which was argued in early November.

Exploring the Legal Tools for New Tariffs

Hassett's reference to a 10% tariff likely points to a potential use of Section 122 of the 1974 Trade Act. This provision allows the president to impose tariffs of up to 15% for 150 days to address a balance of payments problem.

However, any extension beyond this 150-day period would require explicit authorization from Congress. The administration would likely use that time to identify and prioritize which countries and industries to target with more durable measures.

These subsequent actions would rely on different legal authorities:

• Section 232: This allows the Commerce Department or the U.S. Trade Representative's office to restrict imports of a product on national security grounds.

• Section 301: This authority is used to investigate and target a specific country for discriminating against U.S. exports.

Both of these processes can take months to complete, as they require public consultation and allow U.S. importers to apply for exemptions.

What's at Stake in the Supreme Court Ruling?

The upcoming Supreme Court decision directly impacts a wide range of tariffs President Trump enacted by citing the International Emergency Economic Powers Act (IEEPA) of 1977. Previous presidents had used this law primarily for targeted economic sanctions, not broad tariffs.

The tariffs at risk include:

• Levies on goods from Mexico, Canada, and China, justified by an alleged economic emergency related to the flow of fentanyl into the U.S.

• Broad tariffs of 10% or higher on nearly every U.S. trading partner, imposed since April 5 to combat persistent trade deficits.

• Tariffs on imports from Brazil, citing alleged suppression of free speech.

• An additional 25% tariff on India in response to its purchases of Russian crude oil.

It is important to note that the court's decision will not affect existing tariffs on U.S. imports of steel, aluminum, cars, and auto parts, as those were imposed using different, well-established trade laws.

The $260 Billion Constitutional Question

During oral arguments in November, even conservative justices expressed skepticism about the emergency tariffs, particularly regarding their function as a source of government revenue.

The U.S. Constitution grants Congress the power to levy taxes. Government lawyers argued that the tariffs are a tool of foreign and economic policy, not a tax.

The financial stakes are enormous. According to U.S. Treasury Department data, the government has collected nearly $260 billion in customs duties in the first 11 months of Trump's second term.

Hundreds of companies have already filed lawsuits to recover these tariff payments. President Trump warned earlier this week that refunding this money would be a complex and lengthy process.

"It would be a complete mess, and almost impossible for our country to pay," Trump stated on his social media network on January 12. "Anybody who says that it can be quickly and easily done would be making a false, inaccurate, or totally misunderstood answer to this very large and complex question."