The dollar index rose slightly by +0.02% on Monday, finding support from stock market weakness and a stronger-than-expected Nov pending home sales report. The dollar fell after the Dec Dallas Fed manufacturing outlook unexpectedly declined. Markets are pricing in a 16% chance of a -25 bp rate cut at the FOMC meeting in January.

EUR/USD fell by -0.03% on Monday due to no breakthrough in Russian-Ukrainian war talks and lower Eurozone government bond yields. Swaps are pricing in a 0% chance of a +25 bp rate hike by the ECB at the next policy meeting. USD/JPY fell by -0.35% as the yen rose on signals of further rate increases by the BOJ.

Gold and silver prices plummeted on Monday, with gold hitting a 1.5-week low and silver retreating from a record high. Precious metals face pressure from the BOJ signaling low real interest rates and CME raising margin levels. Geopolitical concerns continue to support precious metals prices.

Bullish factors for precious metals include the FOMC’s liquidity injection, geopolitical risks, and concerns over a dovish Fed Chair. Strong central bank gold demand and fund demand for precious metals are also supportive of prices. China’s PBOC and global central banks have been increasing their gold reserves.

Read more at Yahoo Finance: Dollar Gains and Precious Metals Sink on Year-End Liquidation