Last week, financial markets exhibited mixed performance, with global markets experiencing significant volatility due to factors such as the CME outage and expectations of a Federal Reserve rate cut.

A series of weak data released after the US government shutdown ended, coupled with dovish comments from Federal Reserve officials, significantly increased the likelihood of a December rate cut, which pressured the US dollar and spurred a surge in gold prices this week. Investors are also betting that the leading candidate for the new Federal Reserve chairman may adopt an even more dovish policy, further weighing on the dollar's outlook.

Amid rapidly rising expectations of a December rate cut by the Federal Reserve, a weakening macroeconomic outlook, and a potential for continued improvement in liquidity, the international precious metals market remained strong last week. Spot gold broke through the $4,200 mark, reaching a two-week high; silver, driven by both technical factors and capital flows, briefly climbed above $56, setting a new historical record.

The Chicago Mercantile Exchange (CME) experienced an outage last week due to a data center cooling system malfunction, resulting in the suspension of trading in foreign exchange, commodities, and stock index futures. This triggered sharp fluctuations in the spot gold and silver markets, with bid-ask spreads widening to 20 times their normal levels at one point. Some benchmark indices were frozen, and market liquidity plummeted.

In the foreign exchange market: Influenced by rising expectations of a Federal Reserve rate cut, the US dollar index fell sharply this week, and non-US currencies generally strengthened. Market bets on a December rate cut by the Fed have increased, with the probability of a cut rising to 87%. The US dollar index may experience its worst weekly performance since late July.

The Chicago Mercantile Exchange (CME) experienced a shutdown last week due to a data center cooling system malfunction, leading to the suspension of trading in foreign exchange, commodities, and stock index futures. This triggered sharp fluctuations in the spot gold and silver markets, with bid-ask spreads widening to 20 times their normal levels at one point. Some benchmark indices were frozen, and market liquidity plummeted.

After last week's volatility, the crude oil market continued to trade within a narrow range. WTI crude oil closed at around $59.50 per barrel. The market is fully digesting the latest decisions from the weekend's OPEC+ meeting and continues to assess the Russia-Ukraine situation and global macroeconomic data in an attempt to find a clear direction to break the current deadlock. The market is currently in a typical repricing phase after a "news vacuum." The month still recorded its fourth consecutive monthly decline.

Last Week's Market Performance Review:

Last week, in a shortened trading session following the Thanksgiving holiday, US stocks did not collectively close higher. While the rebound continued, the Nasdaq Composite Index still recorded a decline in November, ending its previous seven-month winning streak. At Friday's close, the Dow Jones Industrial Average rose 289.30 points, or 0.60%, to 47,716.42; the S&P 500 rose 0.54% to 6,849.09; and the Nasdaq Composite Index rose 0.65% to 23,365.69, marking its fifth consecutive day of gains.

The precious metals market saw a broad rally last week. Gold successfully broke through key resistance, rising to a two-week high, with bullish sentiment among institutional investors and analysts rising simultaneously. At the close of trading on Friday, spot gold rose 3.75% or $154.39 for the week and 5.42% or $216.81 in November, marking its fourth consecutive monthly gain.

Last week, the precious metals market saw a broad-based surge, driven by supply chain constraints, continued inventory declines, and a sharp increase in market expectations for a December rate cut by the Federal Reserve. Silver prices once again hit record highs, with spot silver rising strongly to close at $56.410 per ounce, having touched a record high of $56.550 per ounce during the session. It gained 12.72% this week, marking its strongest weekly performance since 2020.

Last week, the US dollar experienced an unprecedented rapid decline, marking its worst weekly drop in four months! Soaring expectations of a rate cut and the unexpected emergence of a dovish candidate led to a collective rebound in non-US currencies, pushing key support levels to the brink of collapse. The US dollar index has shown significant weakness recently, currently fluctuating around 99.50, and is poised for its largest weekly drop since July. This comes after the index hit a six-month high just a week ago, and the rapid decline within a few days highlights growing bearish sentiment towards the dollar, marking its steepest weekly decline in four months.

The European Central Bank's meeting minutes, released in the Eurozone, explicitly stated its stance of not planning further interest rate cuts this year or before mid-next year, a stance reflected in the recent euro rebound. The euro/dollar is now accelerating its rise, returning to the 1.1600 area and above, achieving its fifth consecutive day of gains. The yen's recent strength is also attributed to hawkish comments from Bank of Japan officials, reaching around 146 before the weekend. This contrasts sharply with expectations of dollar easing, further exacerbating the volatility pressure on the dollar/yen exchange rate. However, the yen is struggling to attract buyers as uncertainty surrounding the Bank of Japan offsets the impact of the Tokyo consumer price index.

Meanwhile, the UK government's better-than-expected fiscal plan and tax increases, demonstrating confidence in managing government debt, boosted the pound. The pound/dollar pair fluctuated within an uncertain range, hovering around the 1.3230 area before the weekend and ending the week with significant gains, supported by a sharp decline in the dollar. The Australian dollar remained firm last week, climbing back above 0.6500, as continued higher inflation delayed market expectations of a rapid rate cut by the Reserve Bank of Australia (RBA). Stronger-than-expected private sector lending in Australia further reinforced the RBA's cautious outlook. The US dollar remained under pressure as markets anticipated further rate cuts from the Federal Reserve in the coming years.

WTI crude oil traded around $59.40 a barrel at the end of the week, marking its fourth consecutive monthly decline, the longest losing streak in over two years, pressured by concerns about oversupply. Predictions of a global supply glut have increased as OPEC+ resumes production and non-group producers increase output. Traders are now focused on Sunday's virtual OPEC+ meeting, where the organization is expected to maintain its plan to suspend production increases in early 2026. The focus may shift to a long-term review of member countries' production capacity.

Bitcoin continued to hover above $91,000 last week, holding onto gains from the previous two days. Bitcoin recently broke through $90,000, primarily driven by short covering and bargain hunting, while market expectations of a December rate cut also influenced its performance. Forecasting markets indicate that Bitcoin may be capped around $92,000 in November, with ETF outflows limiting upward movement. Bitcoin hovered in a narrow range just above $90,000, with short covering propelling it back from last week's lows, but ETF outflows hampered every attempt to break higher.

The yield on the 10-year U.S. Treasury note rose above 4% on Friday, slightly above the October low reached earlier this week, as traders participated in shortened trading sessions after returning from the Thanksgiving holiday. The yield has fallen nearly 5 basis points this month due to market expectations of another Federal Reserve rate cut in December. Market pricing now implies an approximately 87% probability of a 25 basis point cut in the federal funds rate next month.

Market Outlook This Week:

This week (December 1st-5th), global economic data is being released in rapid succession. China's official PMI and SPGI PMI are both releasing data, while the US is releasing several key economic indicators. Coupled with policy announcements from central banks and industry conferences worldwide, every development could potentially impact the market.

From manufacturing activity to employment prospects, from signals of consumption stimulus to catalysts in specific sectors, investors need to closely monitor the synergistic effect of data and policy, and proactively anticipate potential opportunities and risks.

China's SPGI PMI (formerly the Caixin PMI) focuses more on the operating dynamics of small and medium-sized enterprises (SMEs) than the official PMI, serving as a "barometer" of microeconomic vitality. Meanwhile, the US, UK, France, Germany, the Eurozone, Brazil, and Mexico will all release their manufacturing PMIs, collectively reflecting global industrial production activity and significantly influencing risk appetite in global stock markets.

Before the weekend, the US released the University of Michigan Consumer Sentiment Index for December, along with the September PCE core price index (one of the Fed's most closely watched indicators), and September factory orders and personal consumption figures. The completion of these lagging data points will further clarify the supply and demand dynamics and resilience of the US economy, providing a framework for next week's market performance.

Regarding this week's risks:

Risk Warning: Multiple Variables Require Close Monitoring

In addition to core economic data, investors should be wary of four potential risks:

First, geopolitical uncertainties such as the Russia-Ukraine conflict and the Israeli-Palestinian conflict could trigger increased risk aversion, benefiting safe-haven assets like gold and the US dollar.

Second, speeches by officials from major central banks such as the Fed and the ECB could signal an unexpected policy shift, potentially leading to a rapid correction in market interest rate expectations and causing short-term volatility in stock, bond, and currency markets.

Third, a weaker-than-expected global economic recovery or escalating international trade frictions will suppress sentiment towards risk assets.

Fourth, marginal changes in the narrative during the global stock market rebound could resonate with the data and influence equity market trends.

This Week's Conclusion:

This week, global financial markets were characterized by "declining risk appetite and policy expectations dominating." The Federal Reserve's policy direction became the core driver across asset classes, with growth assets generally under pressure and defensive assets relatively outperforming.

Going forward, attention should be paid to the outcome of the OPEC+ production meeting, progress in the Ukraine peace negotiations, the Federal Reserve's forward guidance for its December policy meeting, and the implementation of domestic year-end liquidity arrangements and economic stimulus policies.

The prospects for a Russia-Ukraine peace agreement remain uncertain, and risk aversion continues to disrupt global financial markets.

Rubicko, Vitko, and US Vice President Vance held multiple rounds of negotiations with the Ukrainian side on the terms of the Russia-Ukraine peace proposal. The proposal has now been streamlined to a 19-point plan, but as the agreement gradually approaches a version acceptable to both Europe and Ukraine, Moscow is showing increasing caution regarding the progress of the negotiations, which may affect the established goal of a rapid resolution to the conflict.

Against the backdrop of increasingly tense geopolitical tensions, the US government recently conveyed a key message to its European allies: the US will only consider providing any form of security guarantees after Ukraine and Russia reach a peace agreement. This stance not only highlights the Trump administration's strategic shift on the Ukraine issue but has also sparked widespread international attention and controversy.

Potential Impacts and Future Outlook: Financial Market Trends

The continued uncertainty surrounding the Russia-Ukraine conflict and the shifting landscape of external support continue to impact global financial markets.

The 28-point peace framework proposed by the United States emphasizes an agreement first, with security guarantees secondary. This is seen as a signal of concessions to Russia, including potential territorial concessions and the lifting of some sanctions. Once an agreement is implemented, the "geopolitical premium" of the Ukraine conflict will quickly dissipate—a premium that has driven gold and oil prices to surge multiple times over the past four years. According to market analysis, the prospect of peace will reduce global safe-haven demand, while simultaneously releasing Russian energy supply. Coupled with expectations of potential interest rate cuts by the Federal Reserve, this will create a "double whammy" effect in commodity markets. In the short term, although a weaker dollar may provide support, the US "peace first" strategy, while accelerating the end of the conflict, poses a double blow to gold and oil prices: gold loses its safe-haven appeal, and oil is mired in supply difficulties. Both are expected to face a 5-10% risk of decline in the short term. In the long run, however, oversupply and a rebound in risk appetite will dominate price trends. Investors need to be wary of the risk of a reversal if negotiations break down, which could instantly reignite inflation and risk aversion, providing new upward momentum for gold and oil prices.

If a peace agreement is successfully reached: Decreased risk aversion could lead to some capital outflows from dollar assets, while expectations of a Fed rate hike might weaken, putting pressure on the dollar exchange rate. Conversely, if a peace agreement fails: Increased risk aversion could strengthen the dollar as a safe-haven currency, and the Fed might maintain a hawkish stance, supporting the dollar.

Regarding oil prices, Russia, as a major energy exporter, continues to receive support from the protracted conflict and potential supply-side disruptions (such as shipping lane security and adjustments to sanctions). Changes in European support for Ukraine and risks to energy facilities in conflict zones further exacerbate market concerns about energy supply stability; if peace negotiations progress, oil prices may face downward pressure.

Regarding gold prices, the conflict has entered a more uncertain phase, coupled with fluctuations in external support policies and recurring geopolitical tensions, strengthening gold's safe-haven appeal. Meanwhile, global concerns about the economic impact of the conflict and market volatility caused by policy adjustments by various parties are also supporting gold prices. Until geopolitical risks are clearly alleviated, gold prices are expected to maintain a relatively strong trend.

Does the US Dollar Index present both challenges and opportunities? Extreme short positions suggest a historic rebound is imminent.

The US Dollar Index, a key indicator measuring the strength of the dollar against a basket of six core currencies, was under pressure last week due to a combination of factors, experiencing multiple resistances. At the same time, the sudden surge in short positions suggests a risk of a rapid rebound.

Influenced by data, traders' continued expectation of a US interest rate cut in December pushed the dollar lower in early trading. Meanwhile, news of a delayed signing of the Russia-Ukraine peace agreement and long covering after excessive short covering boosted the dollar index. Finally, influenced by the UK's better-than-expected fiscal budget and US data, the dollar continued to fluctuate widely.

Crowded Short Positions Suggest Potential Rebound in the US Dollar Index:

Extreme Short Positions by Hedge Funds Suggest a Historical Repeat: Hedge funds are aggressively shorting the US dollar, resulting in an extreme short position, with the imbalance reaching one of the highest levels in the past two decades. Position indices show funds are currently deeply entrenched in an "extreme short" range, and historical patterns suggest a risk of a rebound.

The market has focused on this pattern, warning of dangerously high trading congestion. Hedge funds hold a large number of short positions in the US dollar index (i.e., a sharp reduction in long positions). Historically, similar position levels often present solid buying opportunities—at least short-term rebound opportunities. When trading congestion reaches its peak, contrarian trading usually offers trading value.

Looking back over the past two decades, every large-scale, concentrated shorting of the US dollar has ultimately ended in the same way: the dollar triggers a rebound, forcing quick-money traders to liquidate their positions, further strengthening the dollar. This historical pattern suggests that the current downward trend of the US dollar index may face a risk of a temporary reversal.

Despite negative news regarding Nvidia, US stocks did not fall, highlighting market resilience and benefiting the US dollar index.

It is worth noting that the S&P 500 rebounded early last week after four consecutive weeks of declines, and the Nasdaq Composite Index surged by more than 2.5%. However, shares of artificial intelligence leader Nvidia (NVDA) fell 3% due to media reports that Metaverse Platforms (META) was considering adopting AI chips from Alphabet Inc. (GOOGL). However, the recent weakness in sectors such as digital currency and quantum computing reflects a market adjustment phase. The rebound at the beginning of last week indicates that the buy-on-dips logic remains valid, and seasonal factors generally support a year-end rebound.

Combined with fundamental factors—recent US data and Fed officials' statements increasing bets on a December rate cut, coupled with the easing of tensions between Russia and Ukraine and the ongoing US government shutdown, leading to record-high government debt—the US dollar index may experience a resistant decline before gradually breaking through these three key support levels.

Can silver regain momentum and challenge the historical high of $60,000?

Expectations of a Federal Reserve rate cut surged from 30% to over 80%, boosting sentiment in the precious metals market and reinforcing the overall positive outlook for silver. Last week, spot silver continued its upward trend. Low trading volume before the holiday provided a window for bulls to test upper resistance levels without encountering significant selling pressure. This trend reflects a continued bullish bias in the market, but the thin trading environment lacks the strong momentum needed for a decisive breakout.

What will drive the precious metals market higher this week?

The performance of the gold market continues to influence sentiment across the entire precious metals sector. Last week, gold prices strengthened, driven by renewed expectations of a Federal Reserve rate cut. A series of recent US economic data releases—including weak retail sales, a declining consumer confidence index, and a stable producer price index—significantly increased market bets on a December rate cut, with the probability jumping from approximately 30% at the end of last week to over 80%. As a result, gold prices rose by more than 1%, subsequently increasing attention to the entire precious metals sector, including silver. Major investment banks remain optimistic about the year-end performance of precious metals. The report emphasizes the continued gold-buying trend by central banks worldwide—a factor that provides significant sentiment support for the silver market, given the historical correlation between gold and silver and their synchronized fluctuations during monetary policy repricing cycles.

Traders are closely watching Fed signals and the performance of the US Treasury market.

US Treasury yields strengthened slightly, with the 10-year Treasury yield around 4.02% and the 2-year Treasury yield around 3.485%. Furthermore, rumors of leadership changes at the Federal Reserve have attracted trader attention, with Kevin Hassett considered a leading candidate. His support for low interest rates has further strengthened market expectations for policy easing, indirectly supporting silver prices by boosting the overall bullish sentiment in precious metals.

How will the dollar's rebound affect silver?

The dollar index rebounded from its support level and recovered the 200-day moving average, but this movement occurred against a backdrop of thin trading before the holiday. A more sustained dollar rebound could put resistance to the upward movement of gold and silver, but the current lack of market participation suggests that traders have not yet viewed this rebound as a substantial negative factor.

Silver Outlook: Can Bulls Reclaim the All-Time High?

Silver's short-term trend hinges on whether bulls can break through the previous all-time high of $54.860 with strong momentum. A confirmed breakout would open the way for a move towards the all-time high of $60.000.

On the downside, the main support level is the psychological barrier of $50.000, with the 50-day moving average (currently at $49.50) serving as a key indicator for determining the main trend. Given the overall strength of the precious metals sector, rising expectations of interest rate cuts, and a lack of significant selling pressure, as long as silver can hold above this support level and continue to exert pressure on the $54.390 resistance level, the short-term trend (at least for the rest of the year) will remain bullish, challenging the all-time high of $60.000.

The Russia-Ukraine negotiations remain shrouded in uncertainty; oil prices appear to be on a rollercoaster ride in the short term?

In late last month, the international crude oil market experienced a thrilling rollercoaster ride, from a mild rebound to a sharp decline in the middle of the month, and then a cautious recovery at the weekend. Oil prices ultimately achieved a rare weekly gain amidst the tug-of-war of multiple factors. However, this slight increase could not mask the overall weakness, with Brent crude and US crude falling for the fourth consecutive month, marking the longest losing streak since 2023. Geopolitical risks, expectations for Federal Reserve monetary policy, and the prospect of a global supply glut intertwined, dominating every fluctuation in the market.

Investors wavered between optimism and skepticism regarding the peace negotiations in Ukraine, while the approaching OPEC+ meeting added further uncertainty. Looking back at last month, the oil price movement not only reflected the impact of short-term events but also foreshadowed potentially greater supply pressure and demand uncertainty in the future oil market.

Interest Rate Cuts and Geopolitical Sentiments Ignite Upward Momentum

International oil prices showed strong rebound momentum at the opening on Monday in late last month. This surge was primarily driven by strong market expectations of a December rate cut by the US Federal Reserve. Fed Governor Waller publicly stated that weak employment data was sufficient to support a further 0.25 percentage point rate cut, boosting oil demand. Meanwhile, the uncertain prospects of the Ukraine peace negotiations further increased the geopolitical risk premium.

While US and Ukrainian officials have worked to narrow their differences on ending the war, doubts about the Russian oil export agreement have deepened. Recent oil price weakness, though hampered by reports of peace progress, has resulted in a significant reduction in the risk premium, and the possibility of the war continuing will inject new uncertainty into the market.

A glimmer of peace appears, but concerns about oversupply severely impact oil prices.

Oil prices reversed sharply, this dramatic correction stemming from Ukraine's positive hints regarding the US government's framework for a Russia-Ukraine peace agreement, which the market viewed as a potential breakthrough to end the war. Peace negotiations are like a tango, requiring both sides to move in unison; currently, Russia's attitude remains ambiguous. If the conflict ends, Western sanctions on Russian energy trade may be quickly lifted, amplifying the global oil supply glut next year.

Meanwhile, oversupply expectations loom large over the market, with crude oil supply growth projected to exceed demand growth by at least 2 million barrels per day in 2026, and no signs of supply shortages expected in 2027. A peace agreement, if realized, would help Russian oil production recover to OPEC+ agreed levels.

Looking Ahead:

In summary, although oil prices saw a modest increase of nearly 1% last week, the market experienced significant volatility and a cautious overall trend due to the combined effects of geopolitical uncertainties, signals from the Federal Reserve's policy, and global oversupply pressures.

Looking ahead, the outcome of the OPEC+ meeting will directly influence the short-term supply landscape. A successful Russia-Ukraine negotiation could amplify the oversupply risk and push oil prices further down; conversely, a breakdown in negotiations would reignite geopolitical risk premiums. Market forecasts for the average Brent crude oil price in 2027 are only $57-60, while forecasts for the average WTI crude oil price are $52-55, reminding investors to be wary of the fragility of the global economic recovery.

Overview of Important Overseas Economic Events and Matters This Week:

Monday (December 1st): Australia's Q3 Gold Exploration Spending (AUD 10,000); Eurozone November SPGI Manufacturing PMI Final; UK November SPGI Manufacturing PMI Final; US November SPGI Manufacturing PMI Final; US November ISM Manufacturing PMI

Tuesday (December 2nd): Australia's ANZ Consumer Confidence Index for the week ending November 30th; Australia's Q3 Current Account (AUD 100 million); Eurozone November Harmonized CPI YoY - Preliminary Unadjusted (%); Eurozone October Unemployment Rate (%)

Wednesday (December 3rd): Australia's November AIG Manufacturing Performance Index; Australia's Q3 Seasonally Adjusted GDP QoQ (%); UK November SPGI Services PMI Final; US November ADP Employment Change (10,000s); US September Import Price Index MoM (%); US November ISM Non-Manufacturing PMI

Thursday (December 4): Eurozone October Retail Sales (MoM/YoY) (%); US Initial Jobless Claims for the Week Ending November 29 (thousands); US October Trade Balance (USD billion) (1204-1211)

Friday (December 5): Eurozone Q3 Seasonally Adjusted GDP (Final) (%); US September Personal Spending (MoM) (%); US September Durable Goods Orders (Revised) (%); US September Factory Orders (MoM) (%); US December University of Michigan Consumer Sentiment Index (Preliminary)

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