'No Smoking Gun': Traders Search for Catalysts Amid Silver's Sudden Slump

Commodity

Economic

Summary:

Silver tumbled dramatically overnight after initially smashing through $80 an ounce for the first time (topping $84 at its highs), halting a near vertical recent rise driven by Chinese speculative demand.

Surging Chinese investment demand has pulled the metal higher, with premiums for spot silver in Shanghai rising above $8 an ounce over London prices, the biggest spread on record...

As Bloomberg reports, the blistering rally has provoked extreme measures in China's investment landscape, with the country's only pure-play silver fund turning away new customers after its repeated risk warnings went unheeded.

The fund's manager announced the unusual step Friday after multiple actions - from tighter trading rules to cautionary advice about "unsustainable" gains - failed to quell an eruption of interest fueled by social media.

However, Goldman Sachs Asia trading desk noted 'no smoking gun' for the reversal:

While there are only 3 days ahead of New Year, China commodities remain volatile. Silver surged 9.25% by lunch break and people are asking what factors investors are pricing for silver.

However, risk off in the afternoon without smoking gun. Precious had significant correction.

Palladium and platinum both ended at limit down and silver's early gain was almost wiped out and ended +0.51% only while gold lost 0.91%.

Open interest across the 4 precious metal contract all declined.

Although they do point out that GFEX tightened measure to curb excessive trading of palladium and platinum a few days ago and investors were leaving the market and prices corrected notably today.

Bloomberg macro strategist Adam Linton agrees with Goldman on 'no smoking gun', but...

"While there was no clear driver for the silver pullback, the low levels of liquidity and silver's parabolic rise means that it is vulnerable to a snap back.

Macro drivers and liquidity remain light, meaning that such erratic price action in the metals space could be a feature of trade for what is left of 2025."

The Chinese measures are effectively a rollover of previous policies and were first announced by the Ministry of Commerce on Oct. 30.

Although the country ranks among the top three global producers of silver - largely as a byproduct of industrial metals - it's also the world's largest consumer and therefore not a major exporter.

"The speculative atmosphere is very strong," said Wang Yanqing, an analyst with China Futures Ltd.

"There's hype around tight spot supply, and it's a bit extreme now."

Additionally, as we warned previously, some exchanges are moving to rein in risk.

The margins for some Comex silver futures contracts will be raised from Monday, according to a statement from CME - a move that Wang said would help reduce speculation.

Arguably, silver's rapid ascent needed a breather - perhaps this is it.

PFR ExtremeHurst, a model for spotting herd behavior that generates a self-reinforcing frenzy, has triggered a top exhaustion signal on silver, echoing a similar alert on gold that preceded its 11% correction in October.

Some attributed the sudden downward shift to comments during the weekend from Elon Musk, who highlighted the growing investor frenzy around precious metals, replying to a tweet on Chinese export restrictions by saying on X:

"This is not good. Silver is needed in many industrial processes."

For now, the decline is stable and hardly indicative of a herd rushing for the exits. But a thin liquidity holiday-shortened week could exacerbate any moves.

Source: Zero Hedge

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Warren Takunda

Economic

Iranian traders and shopkeepers staged a second day of protests Monday after the country’s currency plummeted to a new record low against the US dollar.

Videos on social media showed hundreds taking part in rallies in Saadi Street in downtown Tehran as well as in the Shush neighbourhood near Tehran's main Grand Bazaar, which played a crucial role in the 1979 Islamic Revolution that ousted the monarchy and brought Islamists to power.

Traders shut their shops and asked others to do the same. The semiofficial ILNA news agency said many businesses and merchants stopped trading even though some kept their shops open.

There were no reports of police raids though security was tight at the protests, according to witnesses.

On Sunday, protest gatherings were limited to two major mobile markets in downtown Tehran, where the demonstrators chanted anti-government slogans.

Rapidly devaluing currency

Iran's rial on Sunday plunged to 1.42 million to the dollar. On Monday, it traded at 1.38 million rials to the dollar.

Exchange rates for Iran’s currency vary sharply depending on whether official or free-market figures are used. On international forex platforms, the euro trades at around 49,000 rials, a rate that reflects Iran’s tightly controlled official exchange system that is largely inaccessible to ordinary Iranians.

In contrast, the free-market rate — commonly cited by local traders and international media — is far weaker, with the euro trading at well over a million rials, or around 150,000 tomans, highlighting the gap between state-set rates and the real value of the currency on the street amid inflation, sanctions and capital flight.

The rapid depreciation is compounding inflationary pressure, pushing up prices of food and other daily necessities and further straining household budgets, a trend that could worsen by a gasoline price change introduced in recent days.

Is hyperinflation around the corner?

According to the state statistics center, inflation rate in December rose to 42.2% from the same period last year, and is 1.8% higher than in November. Foodstuff prices rose 72% and health and medical items were up 50% from December last year, according to the statistics center. Many critics see the rate a sign of an approaching hyperinflation.

Reports in official Iranian media said that the government plans to increase taxes in the Iranian new year that begins on 21 March have caused more concern.

Iran’s currency was officially trading at 32,000 rials to the dollar at the time of the 2015 nuclear accord that lifted international sanctions in exchange for tight controls on Iran’s nuclear program.

US tensions strain the economy

That deal unraveled after US President Donald Trump unilaterally withdrew the United States from it in 2018. There is also uncertainty over the risk of renewed conflict following June’s 12-day war involving Iran and Israel.

Many Iranians also fear the possibility of a broader confrontation that could draw in the United States, adding to market anxiety.

In September, the United Nations reimposed nuclear-related sanctions on Iran through what diplomats described as the “snapback” mechanism. Those measures once again froze Iranian assets abroad, halted arms transactions with Tehran and imposed penalties tied to Iran’s ballistic missile program.

Source: Euronews

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Glendon

Forex

Economic

There is little on the economic calendar for the final week of the year, leaving Fed minutes from the December meeting as the lone focal point for markets during the New Year holiday stretch. The minutes are expected to shed light on the internal debate that produced a rare three-way split. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid both voted to hold rates steady. At the opposite extreme, ultra-dove Governor Stephen Miran dissented in favor of a larger 50bp cut. The remaining policymakers backed the consensus move, delivering a 25bp reduction that lowered the target range to 3.50–3.75%.

The accompanying statement tweak was just as important as the vote itself. By implying a higher hurdle for additional cuts, the Fed effectively endorsed market pricing for a January hold, even as longer-term expectations remain unsettled. That uncertainty is evident in futures markets, where odds of a March cut hover around 50%.+

Meanwhile, the dot plot exposed just how divided the committee remains. Excluding Miran, policymakers were almost evenly split, with four projecting one cut in 2025 and seven seeing no cuts at all—including scenarios involving renewed tightening. At the same time, seven officials penciled in two or more cuts in 2026. This wide dispersion suggests it will take a meaningful shift in data to pull expectations decisively away from the median one-cut outlook.

With that backdrop, it is premature to draw firm conclusions, at least not before the December non-farm payrolls report on January 9, which is likely to be the next genuine catalyst for repricing Fed expectations.

Attention is also firmly on geopolitics. US President Donald Trump said talks with Ukrainian President Volodymyr Zelenskyy were "getting very close" to a peace agreement, though he acknowledged major unresolved issues, including the fate of the Donbas region. Security guarantees also remain another sticking point. Zelenskyy said agreement had been reached in principle, while Trump was more cautious, suggesting Europe would need to shoulder much of the responsibility with US backing. Zelenskyy later said he had requested security guarantees lasting up to 50 years and that any peace deal should be put to a referendum during a 60-day ceasefire.

In the currency markets, Yen is leading gains for the day so far, followed by Dollar and Euro. While Kiwi, Aussie, and Loonie lag, and Sterling and Swiss Franc trade near the middle of the pack.

In Europe, at the time of writing, FTSE is down -0.01%. DAX is down -0.10%. CAC is up 0.09%. UK 10-year yield is down -0.09 at 4.495. Germany 10-year yield is down -0.021 at 2.845. Earlier in Asia, Nikkei fell -0.44%. Hong Kong HSI fell -0.71%. Chian Shanghai SSE rose 0.04%. Singapore Strait Times fell -0.05%. Japan 10-year JGB yield rose 0.017 to 2.058.

BoJ opinions suggests series of hikes as neutral rate remains distant

The latest Summary of Opinions from the BoJ's December 18–19 meeting reinforced a clear tightening bias, with many policymakers arguing that the December rate hike should not mark the end of the cycle.

One opinion noted there was "still considerable distance" to neutral levels, explicitly calling for rate hikes at "intervals of a few months". Another linked Yen weakness and rising long-term yields partly to the policy rate being too low relative to inflation, suggesting delayed normalization risks exacerbating financial distortions.

Inflation concerns featured prominently throughout the discussion. Several members described recent price pressures as "sticky". One opinion highlighted spring wage negotiations as a key test, arguing that a third consecutive year of target-consistent wage growth would confirm underlying inflation has reached 2%.

Still, not all voices favored an aggressive path. Some policymakers urged caution, citing uncertainty around the neutral rate and shifting global rate environments. They argued flexibility should take precedence over targeting a specific policy level.

At the meeting, the BoJ raised its policy rate to a 30-year high of 0.75%.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.7868; (P) 0.7886; (R1) 0.7914;

Intraday bias in USD/CHF remains neutral and more consolidations would be seen above 0.78670 temporary low. While stronger recovery cannot be ruled out, further fall is expected as long as 0.7986 resistance holds. Break of 0.7860 will target 0.7828 low. Decisive break there will confirm larger down trend resumption.

In the bigger picture, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low). Long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.

Source: ACTIONFOREX

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Winkelmann

Forex

Economic

The People's Bank of China has unveiled comprehensive new guidelines to strengthen digital yuan infrastructure, marking a significant milestone in the evolution of the world's most advanced central bank digital currency. These regulations, effective January 1, 2026, fundamentally reshape how China's digital currency ecosystem will operate and integrate with the traditional financial system.

Digital Yuan Infrastructure Enters New Governance Phase

The People's Bank of China announced these guidelines through the 21st Century Business Herald, a respected financial publication. Consequently, the central bank will implement several structural changes to the digital yuan system. Specifically, the PBOC will include digital yuan in deposit reserves for the first time. Additionally, the central bank will classify digital wallets by liquidity levels. These measures represent a maturation of China's CBDC project, which began pilot testing in 2020.

China's digital yuan, officially called the Digital Currency Electronic Payment (DCEP), has undergone extensive testing across multiple cities. Moreover, the currency has seen transaction volumes exceeding 1.8 trillion yuan ($250 billion) since its inception. The new guidelines therefore build upon this substantial existing infrastructure. Financial analysts view these developments as crucial for several reasons. First, they provide regulatory clarity for financial institutions. Second, they enhance systemic stability. Finally, they position the digital yuan for broader international use.

Structural Changes to Digital Currency Management

The PBOC will establish a dedicated digital yuan management committee to oversee implementation. This committee will operate a center for both domestic and international operating systems. Furthermore, this centralized approach ensures continuous management and supervision. The guidelines specifically address several key areas:

· Deposit Reserve Inclusion: Digital yuan holdings will now count toward bank reserve requirements

· Wallet Classification: Wallets will be categorized by liquidity and usage patterns

· Governance Framework: Clear lines of authority and responsibility for CBDC operations

· International Systems: Separate but integrated systems for cross-border transactions

These changes follow extensive consultation with commercial banks and payment platforms. Major financial institutions like Industrial and Commercial Bank of China have already begun preparing for the transition. Similarly, payment providers including Alipay and WeChat Pay are updating their systems accordingly.

Expert Analysis on Financial System Integration

Financial technology experts emphasize the significance of including digital yuan in deposit reserves. Dr. Li Wei, a CBDC researcher at Tsinghua University, explains this development. "This integration fundamentally changes how monetary policy interacts with digital currency," she states. "By treating digital yuan similarly to physical currency in reserve requirements, the PBOC maintains control over money supply."

The wallet classification system introduces important distinctions between different types of digital holdings. High-liquidity wallets for daily transactions will have different rules than savings-oriented wallets. This approach mirrors existing distinctions in traditional banking products. Consequently, users will experience more tailored digital currency services. Financial institutions meanwhile gain clearer parameters for product development.

Comparative Analysis with Other CBDC Projects

China's approach to digital currency infrastructure differs significantly from other major economies. The table below illustrates key distinctions:

Country/Project	Status	Key Features	Infrastructure Approach
China (Digital Yuan)	Advanced Implementation	Two-tier distribution, offline capability	Centralized management with commercial bank participation
European Union (Digital Euro)	Preparation Phase	Privacy-focused design	Decentralized technical infrastructure
United States (Research)	Early Exploration	Bank-intermediated model	Private sector partnership emphasis
India (Digital Rupee)	Pilot Testing	Wholesale and retail versions	Hybrid public-private infrastructure

China's digital yuan infrastructure now represents the most comprehensive CBDC framework globally. The inclusion in deposit reserves particularly distinguishes it from other projects. No other major economy has yet implemented this level of integration with traditional monetary tools. This advancement gives China first-mover advantage in several areas. Specifically, it enables more sophisticated monetary policy implementation. Additionally, it provides greater financial stability oversight.

Timeline and Implementation Roadmap

The PBOC has outlined a clear implementation timeline leading to the January 2026 effective date. Commercial banks must complete system upgrades by September 2025. Payment platforms face a November 2025 deadline for compliance testing. The digital yuan management committee will form in March 2025. This committee will immediately begin operational planning.

International systems development will proceed concurrently with domestic preparations. The PBOC has already engaged with several foreign central banks regarding interoperability. These discussions focus particularly on cross-border payment efficiency. Hong Kong has served as an important testing ground for international digital yuan use. Successful experiments there inform the broader international system design.

Impact on Financial Institutions and Consumers

Commercial banks face both challenges and opportunities under the new guidelines. They must upgrade technical systems to handle reserve requirement calculations for digital yuan. However, they also gain clearer parameters for developing digital currency products. Consumer wallets will see enhanced features and protections. The classification system enables more tailored services based on usage patterns.

Merchants accepting digital yuan will experience streamlined settlement processes. Transaction confirmation times may decrease significantly. Additionally, cross-border merchants gain access to more efficient payment channels. Small businesses particularly benefit from reduced payment processing costs. These economic efficiencies could stimulate broader digital yuan adoption.

Conclusion

The People's Bank of China's new guidelines fundamentally strengthen digital yuan infrastructure through systematic reforms. These measures position China's CBDC for sustainable growth and international expansion. The inclusion in deposit reserves and wallet classification represent sophisticated monetary policy tools. Furthermore, the establishment of dedicated management structures ensures proper oversight. As January 2026 approaches, financial institutions worldwide will closely monitor this digital currency evolution. The digital yuan continues to set global standards for central bank digital currency implementation.

FAQs

Q1: When do the new digital yuan guidelines take effect?The People's Bank of China's new guidelines for digital yuan infrastructure become effective on January 1, 2026.

Q2: How will digital yuan be included in deposit reserves?Commercial banks must count digital yuan holdings toward their reserve requirements, treating digital currency similarly to physical currency for monetary policy purposes.

Q3: What does wallet classification by liquidity mean for users?The PBOC will categorize digital wallets based on their liquidity characteristics, potentially affecting transaction limits, interest accrual, and usage restrictions for different wallet types.

Q4: What is the digital yuan management committee?This newly established PBOC committee will oversee all aspects of digital yuan operations, including domestic and international systems, ensuring centralized supervision and continuous management.

Q5: How do these changes affect international use of digital yuan?The guidelines establish a dedicated center for international operating systems, facilitating cross-border transactions and potentially increasing the digital yuan's role in global trade settlements.

Source: CryptoSlate

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Gerik

Political

Russia-Ukraine Conflict

Zelenskyy presses for long-term security commitment

In a pivotal meeting held at Mar-a-Lago over the weekend, Ukrainian President Volodymyr Zelenskyy called on former U.S. President Donald Trump to support a security guarantee for Ukraine lasting up to 50 years. This request significantly exceeds the current 15-year term envisioned in the 20-point peace plan under discussion. Zelenskyy emphasized that any such guarantee must serve to deter future Russian aggression and ensure Ukraine’s sovereignty well into the future.

The peace plan, still in draft form, would need to be refined and ultimately approved by Ukraine’s population in a national referendum held only during a 60-day ceasefire. However, Zelenskyy noted that Russia appears unwilling to pause hostilities, pointing to ongoing missile and drone attacks.

Meeting with Russia not ruled out but contingent on Western unity

Zelenskyy stated that a meeting with Russian President Vladimir Putin might be possible, but only after Ukraine secures backing from the U.S. and European leaders for a peace framework. This marks a subtle shift in tone after years of deadlock, as both leaders have previously refused face-to-face talks.

In the meantime, Zelenskyy plans to meet with several European heads of state to align strategies and shore up support for the proposed security architecture.

Trump describes progress, but warns of unresolved territorial disputes

Speaking after the meeting, Trump struck a cautiously optimistic tone, saying “we’re getting a lot closer, maybe very close” to an agreement, though “one or two very thorny issues” remain. The major sticking point appears to be the territorial status of the Donbas region in eastern Ukraine a region partially occupied by Russian forces.

Trump acknowledged that “some of that land has been taken” and hinted that future negotiations could involve compromises, suggesting “you are better off making a deal now.”

Despite Trump’s apparent readiness to move talks forward, his comments on potentially ceding land could alarm Ukrainian officials and citizens who have staunchly opposed any territorial concessions to Moscow.

Mixed signals on peace plan approval

While Zelenskyy said security guarantees were “100% agreed” upon in the discussion with Trump, Trump himself gave a more measured assessment. The difference in tone between the two leaders reflects ongoing uncertainties around the specifics of the deal.

Any lasting peace will depend not only on military and political agreements but also on the Ukrainian public’s endorsement via a referendum and a cessation of hostilities, which remains elusive due to Russia’s sustained attacks.

Kremlin responds cautiously

When asked to comment, Kremlin spokesman Dmitry Peskov offered a reserved response, stating that Moscow was not privy to the content of the Trump–Zelenskyy talks. He confirmed that Presidents Putin and Trump had agreed to speak again by phone, suggesting Russia is closely monitoring the negotiations but remains noncommittal.

Meanwhile, Moscow continues to demand the formal handover of the Donbas region, a condition Ukraine has firmly rejected. The gap between the two sides on this issue remains wide, making any near-term breakthrough unlikely.

A fragile opportunity amid entrenched positions

Zelenskyy’s push for a 50-year security guarantee and his openness to future dialogue with Russia highlight a moment of opportunity but also fragility. With U.S. presidential politics and European diplomacy influencing the pace and shape of peace efforts, much depends on whether a unified Western stance can emerge.

Unless a ceasefire is achieved and key territorial questions are resolved, the path to peace will remain steep, despite both sides expressing a readiness to talk.

Source: CNBC

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Gerik

Economic

Market overview: Yields edge down after holiday break

On Monday, Treasury yields declined slightly in early trading as investors returned from the Christmas holiday. The benchmark 10-year Treasury yield fell by 2 basis points to 4.112%, while the 2-year Treasury held mostly steady around 3.475%. Across the curve, longer-dated maturities like the 30-year bond saw yields drop to 4.799%, while short-term instruments such as the 3-month and 6-month notes remained relatively unchanged.

This subdued movement reflects a cautious investor stance as market participants continue digesting macroeconomic data and anticipating the Federal Reserve’s next steps on interest rates.

Strong economic indicators complicate rate expectations

Two key economic updates released last week influenced the bond market's expectations. The Labor Department reported that initial jobless claims dropped to 214,000 for the week ending December 20 10,000 fewer than the previous week and better than forecasts. This suggests continued labor market resilience.

Meanwhile, the Commerce Department’s revision to first-quarter GDP growth showed an expansion of 4.3% the fastest in two years. Such strong growth, especially alongside low unemployment, challenges the notion that rate cuts are urgently needed, even amid market optimism for looser monetary policy in 2026.

These data points indicate a U.S. economy that remains robust, potentially giving the Fed more reason to be cautious in easing policy too quickly.

Market sentiment and Fed independence concerns

Jacob Pedersen, Head of Equity Research at Sydbank, suggested that only one rate cut might materialize in 2026 less than what many investors currently price in. This underscores the potential disconnect between market expectations and Federal Reserve signaling.

Pedersen also warned of looming political pressure on the Fed as 2026 progresses, a U.S. election year. Any perceived compromise of central bank independence could inject volatility into both bond and equity markets.

His comments reflect a broader concern: while financial markets are hopeful for looser policy, actual Fed decisions may lag behind market sentiment, especially if inflation remains sticky or economic growth accelerates further.

A tug-of-war between data and dovish hopes

The bond market is currently caught in a tension between strong economic fundamentals and investor desire for lower interest rates. The slight dip in yields suggests a wait-and-see approach, with traders closely monitoring incoming data and Fed commentary for clearer signals on the 2026 monetary policy trajectory.

Until then, Treasury markets may remain sensitive to any surprises in inflation prints, employment data, or shifts in global financial conditions. For now, the 10-year yield hovering slightly above 4.1% signals caution rather than conviction in a dovish pivot.

Source: CNBC

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Gerik

Economic

Tighter control over emotionally interactive AI

The Cyberspace Administration of China (CAC) released draft regulations proposing strict limits on AI chatbots that mimic human interaction, especially those that simulate personality or emotional relationships. This comes amid rising concerns over the mental health impacts of AI, especially with the growing use of virtual companions and emotionally engaging chatbot apps in China.

The regulations prohibit AI-generated content that could incite self-harm, suicide, verbal violence, or gambling. If a user expresses suicidal thoughts, platforms must ensure a human intervenes and notifies a guardian or designated person. These rules would apply to all AI tools using text, audio, images, or video for public interaction in China.

AI emotional safety takes precedence over content control

This policy shift reflects an evolution from content moderation (as in China’s 2023 generative AI rules) to emotional safety. According to Winston Ma, NYU Law adjunct professor, this regulatory leap underscores China’s aim to safeguard users especially minors from emotional manipulation and excessive dependency on AI systems.

The CAC’s rules propose time restrictions for minors interacting with AI companions, including requiring guardian consent and systems that automatically apply minor-friendly settings if the user's age is uncertain.

Regulation timed as Chinese AI chatbot IPOs surge

The announcement follows IPO filings by two major Chinese AI chatbot developers Zhipu (Z.ai) and Minimax, the latter known for its popular Talkie app. Minimax’s apps accounted for over a third of its revenue, with over 20 million monthly active users. While these companies have not commented on the regulatory implications, their listings in Hong Kong suggest increasing international exposure, possibly affected by Beijing’s evolving stance on AI safety.

Under the new rules, chatbots with over one million registered users or 100,000 monthly active users would need to undergo a formal security assessment, potentially slowing down or altering growth strategies.

A broader global conversation on AI and mental health

China’s move aligns with growing global attention to the mental health effects of AI companions. OpenAI CEO Sam Altman acknowledged the difficulty of moderating suicide-related conversations. The recent lawsuit against OpenAI in the U.S. and the hiring of a “Head of Preparedness” to assess risks highlight similar concerns in the West.

Notably, emotionally responsive AI is becoming more mainstream, with some users forming relationships with AI companions. For example, a Japanese woman reportedly married her AI boyfriend in 2025. Meanwhile, platforms like Character.ai and Polybuzz.ai have seen explosive growth, ranking among the most used globally.

China’s proposed AI regulations signify a landmark shift in global AI governance by directly addressing emotional and psychological risks. As the country pushes to influence global AI rules, these draft measures may shape international norms especially as generative and emotionally engaging AI continues to integrate into daily life.

These new rules show that China is not only accelerating AI development but also establishing moral and psychological boundaries. Whether these regulations set a global precedent or merely tighten domestic control remains to be seen but their introduction suggests that emotional safety may become as crucial as content safety in the next era of AI governance.