The resurgence of silver, climbing back towards its recent historic high above $93 per ounce, has driven the gold-to-silver ratio down to 50 points as of January 16th, marking its lowest level since March 2012. This represents a dramatic shift after the ratio peaked above 100 points in April 2025. Silver is benefiting from a resurgence in speculative demand, which, combined with its already robust industrial demand, has triggered supply chain and liquidity issues, fueling a short squeeze that has lasted for months. Last year, silver prices surged by nearly 150%, and as we move into early 2026, prices continue their upward trajectory. Gold prices are currently holding firm above $4,600 per ounce, having risen over 6% year-to-date; meanwhile, silver prices are positioned above $91 per ounce, boasting a gain of more than 27%. Soaring metal prices, geopolitical risks, and threats to the Federal Reserve's independence are sparking deep-seated market concerns: inflation acceleration in 2026 could far exceed expectations. This is critical for investors because it could shatter the Fed's anticipated control over prices this year. With the inflation rate already stubbornly above the central bank's 2% target, heightened market worries about the price path could cause the two anticipated 25-basis-point rate cuts originally forecast for 2026 to be scrapped. Although some astute fund managers have begun taking protective measures, this layer of concern has not yet been fully priced into the broader financial markets. Taking the 10-year U.S. Treasury yield as an example, it edged up only slightly to 4.16% on Thursday, remaining within the volatile range seen since last August; meanwhile, U.S. stock indices like the Dow and S&P 500 are nearing record highs driven by AI fervor and a rebound in bank stocks, indicating that most investors do not currently view inflation as the primary threat. However, the risk of an unexpected surge in inflation this year is very real. Simultaneously, the market is holding its breath awaiting the Fed Chair nominee that Trump will put forward in May to replace the outgoing Powell. In December of last year, Trump hinted that the new chair would be "someone who believes in big interest rate cuts." There is market concern that new leadership could undermine the central bank's independence. According to the latest Bloomberg survey of 52 economists, exchange rates have become a pivotal factor influencing the Bank of Japan's next policy move. There is a widespread belief that significant yen depreciation could force the central bank to accelerate its actions. After all, Japan's inflation rate has now stayed above the 2% target for four consecutive calendar years, and a weaker currency would further intensify price pressures. The survey results indicate that all respondents predict the policy board will stand pat at its January 22-23 meeting, keeping the benchmark rate unchanged at 0.75%. Regarding the timing of the next rate hike, July emerged as the most popular option, supported by 48% of the economists, significantly领先 other months; 17% each pointed to April or June as the likely timing for a hike. The Bank of Japan had just raised its benchmark interest rate to its highest level in three decades on December 19th of last year. Despite this move, only 35% of observers considered this pace of tightening appropriate. Over 60% of respondents noted that the monetary policy normalization process initiated in March 2024 has been "too slow" or "somewhat slow."
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