Fed rate cut bets continue to power rally in precious metals and equitiesBut silver, platinum and palladium correct lower after surge, gold also slipsDollar steady in holiday-thin trading, yen catches a bid on BoJ summaryOil climbs on geopolitical tensions but still headed for fifth monthly lossIt’s Never Too Late for a Santa RallyIt’s been a bumpy couple of months for equity markets, with worries about an AI bubble and doubts about how many times the Fed will trim rates in 2026 triggering pullbacks. But whilst some concerns linger about bloated valuations within the AI sector and there’s a sizeable risk the Fed won’t be able to deliver as many rate cuts the markets have priced in, the festive mood seems to have spurred some optimism during the last few remaining trading days of 2025, pushing the S&P 500 ever closer to the 7,000 level.Expectations of at least two Fed rate cuts solidified on the back of the soft jobs and CPI reports out of the US this month, with traders brushing aside an extremely strong GDP reading for Q3. However, although the tech-heavy Nasdaq has recovered significantly and stands about 2% below its all-time high from late October, it is value stocks that have been driving the broader S&P 500 and Dow Jones indices higher. The latter closed near its mid-December record peak on Friday, while the S&P 500 hit a new intra-day record.Stocks globally are mixed today, but in the absence of any major data releases and geopolitical shocks, the festive cheer looks set to close out the year. If anything can spoil things, though, it’s the Fed’s minutes of the December meeting that’s due on Tuesday. The decision to cut rates by 25bps at that meeting was split, and there may yet be some hawkish surprises that could catch investors off guard.An Extraordinary Year for Precious MetalsHawkish minutes would also be bad news for precious metals, as expectations of lower interest rates in the world’s largest economy have been a key factor for all the hoarding that’s become a major characteristic of 2025. Any shift in the dovish bets would be anathema for gold, as well as for silver, platinum and palladium.But it’s not all about Fed rate cut expectations that’s been powering the incredible rally in precious metals. Central bank purchases remain a primary source of demand for gold, which is up 70% in the year-to-date, while supply-demand imbalances have fuelled the surge in silver, platinum and palladium.Silver has been the best performer this year (+160%). It received an extra boost over the weekend from a post on X by Elon Musk, saying that China’s restrictions on silver exports, which will take effect on January 1, 2026, are “not good” given how essential it is in industrial processes. The grey metal shot up to a new all-time high of $83.62 earlier today before sharply reversing lower to below $75. Other precious metals mirrored the moves, with palladium tumbling more than 12% and gold shedding almost 1.5% after on Friday scaling a new record peak of $4,549.71.Aside from the fact that a technical correction was well overdue, signs of progress in the US-led efforts for peace in Ukraine could also be weighing on the popular metals. President Trump held talks with Ukrainian President Volodymyr Zelenskyy in his Florida Mar-a-Lago resort on Sunday. The two sides seem close to agreeing on security guarantees but the question of how much territory Ukraine will cede to Russia remains a sticking point and a deal could be weeks away.Some Support From Geopolitics for the Battered OilThe growing prospect of a Russia-Ukraine peace deal has been an added headache for oil prices in recent months, as both WTI and Brent crude futures are on track for a fifth straight month of losses. The ongoing supply glut, amid OPEC+ group’s commitment to normalize output, will likely remain a drag in the early parts of 2026, but recent geopolitical developments have raised the risk of supply disruptions.Trump’s intervention in Venezuela, and now in oil-producing Nigeria as well, following US strikes on ISIS targets in the country, have increased the possibility of escalation in one or more of these hotspots. There are tensions in the Middle East too. Iran on Saturday said it is in full-scale war with the US, Europe and Israel, fuelling fears of a fresh missile strike launch. Meanwhile, Saudi Arabia has been carrying out airstrikes on Yemeni separatists in the country.WTI futures were last trading 1.9% higher at $57.79.Hawkish BoJ Summary Lifts YenThere is less excitement in FX markets, where the US dollar is mostly trading within its recent ranges against its main peers. The Australian and New Zealand dollars are the worst performers, paring some of last week’s strong gains. But the Japanese yen is broadly firmer, benefiting from a somewhat hawkish tone in the Bank of Japan’s Summary of Opinions of the December meeting published earlier today.BoJ board members appeared to agree that further rate increases will be needed over the coming months, opening the door to more frequent hikes, especially if the spring wage negotiations culminate in pay deals that are at least as big as last year’s.Still, investors only modestly scaled up their tightening expectations for the BoJ, with just under two hikes priced in, while upping their bets for Fed rate cuts to about 59 basis points.The dollar eased to around 156.30 yen in European trading, lessening the chances of intervention during the holiday period.