On December 23, former Bank of Japan (BOJ) policy board member Makoto Sakurai stated that the central bank may raise interest rates three more times during Governor Kazuo Ueda's remaining term until early 2028, pushing rates to 1.5%. He also warned that the government's aggressive fiscal spending plans could backfire by exacerbating inflation. Sakurai expects the next rate hike to occur in June or July next year, lifting rates to 1.0%, with timing dependent on the strength of the U.S. economy and domestic wage and price trends.
He noted that while the BOJ has not publicly stated it, internal estimates likely place the neutral interest rate around 1.75%. Raising rates to 1.5% would keep them below this level while leaving room for future cuts. However, further hikes beyond this neutral rate—neither stimulating nor restraining the economy—will face greater challenges.
Meanwhile, JPMorgan predicts that uncertainty over tariff policies, strong demand from ETFs, and central banks could drive gold prices to a historic high above $4,000 per ounce in 2025. New demand from Chinese insurance giants and the cryptocurrency sector may push the precious metal beyond $5,055 per ounce by late 2026. "While this gold rally has not been linear and won’t be in the future, we believe the trend driving prices higher is far from exhausted," said Natasha Kaneva, Global Head of Commodities Strategy at JPMorgan. "The long-term trend of official reserve diversification and investor allocation to gold still has room to grow. We expect gold demand to push prices toward $5,000 by late 2026."
Key data to watch today include the U.S. Q3 annualized GDP growth rate (preliminary), Canada’s October seasonally adjusted GDP monthly rate, U.S. October durable goods orders (preliminary), U.S. October industrial production monthly rate, and the U.S. December Conference Board Consumer Confidence Index.
**Gold/USD** Gold surged yesterday, breaking the $4,400 level to hit a record high, currently trading near $4,480. The rally was driven by dovish remarks from Fed officials reinforcing expectations of rate cuts in 2026, alongside renewed geopolitical tensions boosting safe-haven demand. Resistance is eyed near $4,550 today, with support around $4,400.
**USD/JPY** USD/JPY edged lower yesterday, closing slightly weaker near 156.00. Profit-taking and a softer U.S. dollar due to the Fed’s dovish tone weighed on the pair. Hawkish comments from BOJ officials and expectations of further intervention also pressured the exchange rate. Resistance is seen near 157.00 today, with support at 155.00.
**USD/CAD** USD/CAD declined yesterday, hitting a four-day low near 1.3740. A weaker U.S. dollar amid renewed rate-cut expectations and stronger-than-expected Canadian economic data dragged the pair lower. Rising crude oil prices due to supply concerns added further downward pressure. Resistance is at 1.3850 today, with support near 1.3650.
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