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So, it’s been about eight months already since “Liberation Day”. How time flies. Yet, we’re yet to see a significant bump to the overall inflation outlook in the US. Yes, higher prices have come but it hasn’t quite translated too strongly to the overall narrative.

And as we look towards 2026, how will all of this change and what will be the inflation story for the year ahead?

The thing to remember about “Liberation Day” is that higher tariffs did not have an instant impact. It took time to filter through to prices and even until today, we’re still yet to see the full extent of how those tariffs have driven up consumer prices.

Core goods inflation is the one thing that’s been slowly showing evidence of that. But otherwise, the overall inflation story is one that has been tamer than anticipated especially for all the fears surrounding Trump’s tariffs before April this year.

Come next year, be wary of the inflation mirage. No, the consumer price index (CPI) isn’t cooling in a meaningful way. Inflation isn’t going away. It’s just the fact that higher prices are here to stay and that we’re reaching a new equilibrium level in terms of where prices should be. That especially in the second half of next year.

As mentioned above, Trump’s tariffs did not have an instant impact. It’s taking well over six months for things to filter through and that’s the important thing to take note for market players.

All of this is going to impact the base effect calculation in how we derive the CPI next year, especially in the second half of the year onwards.

That in turn could see inflation data and the PCE as well drop significantly during the second half of 2026. And if the Fed hasn’t already become politically corrupt by then, it could give them an easy way out in appeasing Trump to deliver more rate cuts.

Long story short, just be wary of the impact of base effects when reading into the CPI data in the second half of next year. That will account for the impact of Trump’s tariffs that have slowly been filtering through to the economy over the last few months.

In other words, the year-on-year reading might show a cooling in terms of inflation. However, that’s just the base effect talking. As such, the monthly data will be the more important metric to scrutinise when the time comes.

Just think of it this way, tariffs caused the price of a watch to increase from $20 to $25 this year. That’s a 25% bump in “inflation”. Come the same period next year, the price might still be at $25 and the “inflation” metric will show 0% instead.

Why is all of this important?

It plays into the Fed outlook of course. How will the central bank respond to all of this?

If pushing for rate cuts in the first half of the year proves difficult, this is one avenue that they could point to in making sure that their policy fits with Trump’s agenda. That as they continue to strive towards a neutral rate of what most people seem to think it’s at around 3%.

So, should and would the Fed look through the base effects and stick to its guns on policy? Or will the new Fed chair deliver on Trump’s agenda and use this as a key selling point?

In any case, the reality of the situation will remain that lower inflation does not mean lower prices. That’s the reality of the world we’ve been living in for the past decades.

This article was written by Justin Low at investinglive.com.

• Nomura flags Asia policy split as Fed seen cutting twice in 2026
• Washington delays semiconductor tariffs as it seeks China trade truce
• KRW up: South Korea NPS activates strategic FX hedging to curb won weakness and volatility
• PBOC sets USD/ CNY reference rate for today at 7.0471 (vs. estimate at 7.0240)
• ICYMI – Tesla sales plummet in UK and Europe as EV market turns hostile
• Japan policymakers flag inflation persistence and asset-price risks in October BoJ minutes
• Bank of Japan Services Producer Price Index (November) +2.7% y/y (expected & prior 2.7%)
• ICYMI – Rising yields force Japan to budget for higher debt-servicing costs
• Oil: Private survey of inventory shows a headline crude oil build vs. draw expected

Asia session summary

• Japan’s November services PPI printed as expected at an elevated 2.7% y/y

• BOJ October minutes landed but were largely overlooked after December’s rate hike

• Broad USD weakness lifted G10 FX, with JPY, AUD and KRW outperforming

• APAC equities traded mixed in thin pre-holiday conditions

• Gold and silver extended gains, with silver breaking above US$72

Data and policy signals from Japan were the early focus in Asia. Japan’s November Corporate Service Price Index , the services-sector PPI, printed in line with expectations at a still-elevated 2.7% year-on-year, reinforcing the view that underlying service-sector price pressures remain firm. The Bank of Japan also released minutes from its October policy meeting, though these attracted little attention given they pre-dated December’s far more consequential decision to lift the short-term policy rate to its highest level in around 30 years.

In FX markets, broad U.S. dollar weakness dominated price action. The dollar index remained on the back foot in holiday-thinned trade, extending losses seen earlier in the week and pushing several G10 currencies to session highs. The yen continued to strengthen, supported by recent official jawboning that reinforced authorities’ discomfort with excessive JPY weakness. The Australian dollar also advanced, while the euro and sterling pushed up toward three-month highs.

The standout move in Asia FX came from South Korea, where the won strengthened sharply after reports that the country’s pension fund had activated strategic foreign-exchange hedging measures — a development seen as adding institutional support for the currency.

Asian equity markets were mixed and largely range-bound, reflecting light volumes as traders wind down ahead of the Christmas period. Japan’s Nikkei 225 posted modest gains, while Hong Kong’s Hang Seng and the Shanghai Composite were little changed. U.S. equity futures traded quietly overnight, hovering around flat in narrow ranges.

In commodities, precious metals extended their recent surge. Gold briefly popped above the US$4,500 level before easing back below the psychological threshold, while silver pushed decisively higher again, trading above US$72 and outperforming on the session.

This article was written by Eamonn Sheridan at investinglive.com.

Summary

• U.S. to impose tariffs on Chinese legacy chips, but only from June 2027

• Decision follows a year-long Section 301 investigation launched under Biden

• Delay preserves leverage while easing near-term trade tensions with China

• Move coincides with negotiations over rare earths and tech export controls

• Broader Section 232 chip tariffs remain possible but not imminent

The United States has opted to delay the imposition of new tariffs on Chinese semiconductor imports until mid-2027, signalling a tactical effort to manage trade tensions with Beijing even as Washington keeps the option of tougher action firmly on the table.

News via Reuters ICYMI.

The Office of the United States Trade Representative said it would move ahead with tariffs on Chinese “legacy” or older-generation chips following a year-long Section 301 investigation, but that the measures would not take effect until June 2027. The tariff rate itself will be announced at least 30 days before implementation, preserving flexibility for future administrations.

The investigation into Chinese chip exports was launched under former President Joe Biden, which concluded that Beijing’s industrial policy amounted to an unreasonable effort to dominate the global semiconductor industry and posed a burden on U.S. commerce. The current administration under Donald Trump has now chosen to delay enforcement, a move widely seen as aimed at stabilising relations with China amid sensitive negotiations over technology and critical minerals.

China responded by opposing the planned tariffs, warning that politicising trade and technology would disrupt global supply chains and ultimately prove counterproductive. Beijing also reiterated that it would take steps to defend its interests if tariffs were imposed.

The decision to defer action comes as Washington seeks to ease pressure points in the broader U.S.–China trade relationship. China has recently imposed export curbs on rare earth metals, a key input for global technology manufacturing. In parallel talks, the U.S. has delayed restrictions on technology exports to certain Chinese firms and launched a review that could allow limited shipments of advanced chips, including some from Nvidia, to resume, despite resistance from U.S. lawmakers concerned about national security risks.

The semiconductor sector is also watching a separate and potentially far more sweeping investigation under Section 232, which could eventually lead to tariffs on chips and chip-containing products from multiple countries. For now, U.S. officials have suggested that any such action is unlikely in the near term.

Taken together, the delay underscores a calibrated approach: maintaining leverage over China’s chip sector while prioritising short-term trade stability and supply-chain resilience.

—

For U.S. technology equities, the decision to delay China chip tariffs until 2027 removes a near-term policy overhang, particularly for semiconductor names with exposure to complex global supply chains. Shares of Nvidia stand out in this context. While Nvidia’s most advanced AI chips remain tightly restricted, the administration’s willingness to review potential shipments of lower-tier processors to China, alongside the tariff delay, suggests a more pragmatic approach that prioritises trade stability and revenue continuity over immediate escalation.

For Nvidia, China remains a strategically important market even under export controls, and clarity that new tariffs will not land imminently helps reduce uncertainty around demand, inventory planning and pricing. More broadly, the move is supportive for U.S. tech hardware firms and semiconductor suppliers, which have been navigating a patchwork of export controls, tariffs and geopolitical risks. By pushing tariff action into the next administration cycle, Washington effectively lowers the probability of sudden supply-chain disruption or retaliatory measures in the near term.

Equity markets are likely to read the delay as modestly constructive for the sector, particularly for mega-cap technology stocks where earnings visibility and global sales exposure are key valuation drivers. However, the longer-term risk remains intact: tariffs have not been cancelled, and policy uncertainty beyond 2026 will continue to cap valuation multiples for chipmakers with meaningful China exposure.

This article was written by Eamonn Sheridan at investinglive.com.

WH economic advisor Kevin Hassett Hassett:

• GDP is a great Christmas present for the American people
• Trump trade agenda is working
• AI boom is being seen in the data
• Regardless of job AI is impacting their job.
• Will see employment change back in the 100K -150K range if GDP stays in a 4% range
• Consumer sentiment is uncorrelated with the hard economic data.
• Prices are down and income is up that’s why we have such strong growth numbers.
• People are very optimistic about their income growth.
• The Fed is way behind the curve in lowering rates.
• We have reduced the deficit by 600 billion year-over-year.
• We will be finalizing a housing plan that will be announced sometime in the new year

Hassett is still one of the favorites for the Fed chair position

This article was written by Greg Michalowski at investinglive.com.

The Conference Board’s latest release confirms that US consumer confidence fell for the fifth consecutive month in December 2025. Despite a temporary reprieve following the end of the federal government shutdown, rising anxiety over jobs and a darkening business outlook have pushed a key recession indicator deeper into the danger zone.

The Headline Numbers

• Consumer Confidence Index: Declined to 89.1 in December versus expectations of 91.0. The current month was down from a revised 92.9 in November (was previously reported at 88.7).

• Present Situation Index: Plummeted by 9.5 points to 116.8, the sharpest drop in current sentiment as views on business conditions turned negative for the first time since September 2024.

• Expectations Index: Held steady at 70.7. Crucially, this gauge has tracked under the 80.0 threshold for 11 consecutive months, a level that historically signals an impending recession.

Details of the Consumer Confidence numbers for December from the Conference Board

Present Situation: A Mildly Pessimistic Turn

Consumers’ assessment of current conditions took a notable hit this month:

• Business Conditions: More consumers now view conditions as “bad” (19.1%) than “good” (18.7%).

• The Labor Market: The share of consumers saying jobs are “plentiful” fell to 26.7%, while those saying jobs are “hard to get” rose to 20.8%.

Expectations: Income and Job Worries Deepen

While the outlook for future business conditions improved slightly, the “human” side of the economy remains under pressure:

• Job Outlook: More consumers expect fewer jobs to be available (27.4%) compared to November.

• Income Stress: While 18.4% expect their income to increase, the percentage of those expecting a decrease also rose to 14.7%.

Demographic and Political Trends

The decline in confidence was nearly universal across the board:

• Generational Divide: Confidence dipped among all age groups. Only the Silent Generation showed increased hope, while Millennials and Gen Z remained the most optimistic despite trending downward.

• Income Brackets: Confidence fell for almost all brackets, with the exception of the lowest earners (under $15K) and highest earners (over $125K).

• Unity in Gloom: Confidence continued to fall among all political affiliations—Democrats, Republicans, and Independents alike.

Expert Analysis

“Despite an upward revision in November related to the end of the shutdown, consumer confidence fell again in December and remained well below this year’s January peak. Four of five components of the overall index fell, while one was at a level signaling notable weakness.”

— Dana M. Peterson, Chief Economist, The Conference Board.

This article was written by Greg Michalowski at investinglive.com.

Looking at the other US data released today in summary:

• US Durable goods orders for Oct -2.2% vs -1.5% est. Prior 0.5% revise from 0.7% (lower)
• Ex transportation 0.2% versus 0.3% expected. Prior 0.6% revised 0.7% (lower)
• nondefense capital ex air October 0.5% versus 0.4% expected. Prior revised lower to 0.9% from 1.1%.
• Ex defense -1.5% versus +0.1% prior
• Click HERE for the full report.

Summary of Industrial Production & Capacity Utilization (November 2025)

The Federal Reserve’s released Industrial Production and Capacity Utilization data for November and it shows that industrial production staged a modest recovery in November after a tepid October. While the headline index beat expectations, capacity utilization remains steady

Key Data vs. Expectations & Prior

• Industrial Production (IP):

  • November Actual: +0.2%.

  • Estimate: +0.1% (Beat).

  • October Revised: -0.1% (Originally reported as flat).

• Capacity Utilization:

  • November Actual: 76.0%.

  • Estimate: 75.9% (Slight Beat).

  • October Revised: 75.9%.

  • Context: This rate remains 3.5 percentage points below the 1972–2024 average of 79.5%.

Major Industry Group Breakdown

• Manufacturing: Remained unchanged (0.0%) in November after a -0.4% decline in October.

• Mining: Jumped +1.7% in November, a sharp reversal from the -0.8% contraction in October.

• Utilities: Decreased -0.4% in November after a volatile +2.6% surge in October.

Market Group Performance

• Final Products: Increased +0.4%, led by a recovery in consumer goods (+0.3%) and business equipment (+0.3%).

• Construction: Continued to weaken, falling -0.6% in November following a steep -1.1% drop in October.

• Materials: Rose +0.2% after remaining flat in the prior month.

Capacity Utilization by Stage

• Crude: Rose to 83.7% (from 83.0% in October).

• Primary & Semifinished: Fell slightly to 75.4%.

• Finished: Edged up to 73.7%.

The “Why” Behind the Numbers

While the +0.2% IP growth beat the 0.1% forecast, the broader trend reveals a stagnant manufacturing sector. The “beat” was largely fueled by a rebound in mining rather than a resurgence in factory output. Persistent headwinds, including tariff uncertainty and slowing discretionary consumer spending, continue to keep capacity utilization (76.0%) near levels seen during previous economic soft patches.

The Trump initiatives to bring back manufacturing to the US should lead to larger numbers down the road. Of course it takes time to build the capacity.

This article was written by Greg Michalowski at investinglive.com.

This follows a decline of 0.9% in retail sales volume for October, which was revised up from a 1.1% decline previously. The year-on-year estimate for November shows that UK retail sales are now 0.6% higher compared to the same month a year ago. However, that is a marked miss on estimates of +1.6% with the monthly reading missing on estimates of a gain of 0.3%.

Looking at the breakdown, food store sales (-0.5%) once again showed a decline while non-store retailing (-2.9%) was a big drag for the month. Meanwhile, other non-food store sales (-0.8%) also showed a modest decline in November.

All of that is somewhat offset by stronger sales in textile clothing and footwear stores (+1.7%) as well as household goods store sales (+1.8%) – likely attributed to longer Black Friday discounting.

Touching on that, it serves as a good reminder that UK retail sales for November 2024 did not include the impact of Black Friday. That spilled over into the December 2024 reporting period. As such, that makes the year-on-year showing here even less enthusiastic. ONS notes that “when Black Friday falls into the November period there is normally a larger monthly rise in November than in either October or December”.

This article was written by Justin Low at investinglive.com.

The BLS released the GDP for the 3Q and it showed strong growth but higher inflation:

• Preliminary GDP for Q3 4.3% vs 3.3% estimate
• Sales 4.6% vs 7.5% last quarter
• Deflator 3.7% vs 2.7% estimate. Prior 2.1%
• Core PCE 2.9% vs 2.9% estimate. Prior 2.6%
• Consumer spending 3.5% vs 2.5% prior

For the full report: CLICK HERE.

Decoding the Q3 2025 GDP Growth

The latest data from the U.S. Bureau of Economic Analysis (BEA) reveals that the American economy expanded at a robust 4.3% annualized rate during the third quarter of 2025. This performance exceeded most market expectations, which had centered around a 3.2% expansion.

Based on the provided chart, here is the breakdown of the key contributors to this growth:

The Primary Drivers of Growth

• Consumer Spending (The Engine): Household spending remains the primary catalyst for the economy, contributing +2.40 percentage points to the overall GDP figure. This reflects continued resilience in private consumption despite earlier concerns of a slowdown.

• Exports (Global Demand): Strong international demand for American products and services added +0.90 percentage points to the growth rate.

• Imports (Calculation Quirk): According to the BEA, imports are a subtraction in the GDP formula. A decrease in imports resulted in a +0.65 percentage point positive contribution to the final figure.

• Government Spending: Public sector expenditures provided a modest tailwind, contributing +0.40 percentage points to the quarterly expansion.

The Sole Headwind

• Investment: Private domestic investment was the only negative contributor in the chart, shaving -0.02 percentage points off the total. This suggests a slight caution among businesses regarding capital expenditures or residential housing activity during the quarter.

The Bottom Line

With a 4.3% growth rate, the U.S. economy remains significantly stronger than many global peers. While some volatility remains due to shifting trade patterns and labor market updates, the dominance of consumer spending indicates that the domestic economic core remains remarkably firm as we head into the final months of the year.

Summary Table: Q2 vs. Q3 Growth Contributions

Atlanta Fed GDPNow: Final Q3 2025 Summary

The Atlanta Fed GDPNow model showed a final reading of 3.5% lower than the 4.3% from the actual data. The data showed a lower contribution from consumer spending of 1.84% vs 2.4% .

Headline Growth Estimate

• Final Estimate: Real GDP growth is projected at 3.5 percent (seasonally adjusted annual rate).

• Recent Trend: This represents a slight downward revision from the 3.6 percent estimate recorded on December 11.

• Context: The estimate peaked at 4.2 percent in late November before cooling off through December.

Key Internal Drivers

The December 16 update incorporated new data from the US Census Bureau and the US Bureau of Labor Statistics, leading to minor adjustments in the growth components:

• Consumer Spending: Contribution to real GDP growth fell slightly to 1.84 percentage points.

• Inventory Investment: Contribution was also adjusted downward, falling to 0.09 percentage points.

This article was written by Greg Michalowski at investinglive.com.

Overview of Canada’s GDP (October 2025)

• Top-Line Growth: Real GDP decreased 0.3% in October, more than offsetting the 0.2% growth seen in September.

• Broad Contraction: 11 out of 20 industrial sectors saw declines.

• Sector Split: Both Goods-producing (-0.7%) and Services-producing (-0.2%) industries contracted during the month.

Manufacturing & Industrial Activity

• Manufacturing Sector: Fell 1.5%, wiping out September’s gains.

  • Durable Goods (-2.3%): Dragged down by machinery and wood products.

  • Lumber Impact: Wood product manufacturing fell 7.3%, the largest drop since 2020, following new US tariffs on Canadian lumber effective October 14.

• Mining & Energy: Contracted 0.6%.

  • Oil & Gas (-1.2%): Lower crude bitumen extraction due to facility maintenance.

  • Potash Rebound: Rebounded 4.5% after a shutdown in September, slightly tempering the sector’s decline.

Labor Disruptions & Public Sector

• Education: Fell 1.8% due to a province-wide teachers’ strike in Alberta (Oct 6–29), causing the largest subsector drop since late 2023.

• Postal Services: Plunged 32.1% as nation-wide strikes by Canada Post workers (CUPW) shifted to rotating actions on October 11.

• Retail Trade: Declined 0.6%, partly affected by a liquor store strike in British Columbia which hit beer, wine, and liquor retailers.

Trade & Construction

• Wholesale Trade: Contracted 0.9%, driven by miscellaneous merchant and machinery wholesalers.

• Construction: Decreased 0.4%, its first decline in six months.

  • Residential: Down for the third straight month due to a slowdown in new single-occupancy home construction.

  • Non-Residential: Tepid growth of 0.1% was the only bright spot in the sector.

The Resilience in Finance

• Record Highs: The Finance and Insurance sector rose 0.4%, marking its fifth consecutive monthly increase.

• Market Activity: Growth was driven by increased activity in both equity and debt markets.

Early Look: November 2025

• Advance Estimate: Early data points to a slight recovery with a 0.1% increase in real GDP for November.

• Drivers: Expected growth in education (recovery from strike), construction, and transportation, though mining and manufacturing are expected to remain weak.

This article was written by Greg Michalowski at investinglive.com.

• ADP Pulse for the week ending December 6 comes in at 11.5K vs a revised 17.5K last week
• For the four weeks ending Nov. 29, 2025, private employers added an average of 17.5K jobs a week. This continued strengthening during the second half of November signals a rebound in hiring after four weeks of job losses. These numbers are preliminary and could change as new data is added.

For the full report CLICK HERE.

The ADP released their monthly report for November earlier in the month and it showed a net positive decline for the month at 32K. This report suggests a rebound in December.

What is the ADP NER Pulse?

ADP recently introduced a major evolution to its labor market tracking: the ADP NER Pulse. This new high-frequency data series was launched on October 28, 2024, to provide a more real-time look at the labor market than the traditional monthly report.

Here is the breakdown of how the 4-week average works and why it matters for your post today.

What is the ADP “Pulse” Data?

Unlike the standard monthly report, which captures a single “reference week” (the week of the 12th), the NER Pulse is a weekly estimate of private-sector employment changes.

• The 4-Week Moving Average: To reduce the “noise” and volatility inherent in weekly payroll shifts, ADP reports the data as a 4-week moving average. This means the number you see today represents the average weekly job gain or loss over the last month.

• The Lag: There is a two-week lag in the reporting. This allows ADP to collect and process complete payroll data from their 26+ million tracked employees to ensure the “pulse” is accurate.

• Frequency: It is released every Tuesday at 8:15 a.m. ET, except for the week when the final monthly National Employment Report (NER) is published.

Why the Switch to Weekly?

The Fed and economists have recently criticized monthly data for being a “lagging indicator.” ADP’s shift aims to solve several problems:

1. Spotting Turning Points: Monthly data can miss sudden economic shifts (like those caused by strikes, weather, or rapid cooling). Weekly data helps identify if a dip is a “bump in the road” or a new trend.

2. Smoothing Volatility: By using the 4-week average, ADP mirrors the methodology used for “Initial Jobless Claims,” making it easier to compare hiring (ADP) vs. firing (Labor Dept).

3. Data Quality: Because it uses actual administrative payroll records rather than surveys, it provides a “hard data” alternative to the BLS’s sometimes volatile survey results.

Why today is important?

Today’s release is particularly important because it follows a period of “choppy” hiring.

• Previous Trend: The data released on December 16 showed a gain of 17,50 jobs per week (4-week average), which signaled a potential rebound after a rough October/November.

• The data today shows a slowing of that hiring but still positive.

This article was written by Greg Michalowski at investinglive.com.

As a reminder, this isn’t the first time that Japan has explored the potential to get rare earth minerals supply outside of China. In fact, the whole Lynas plant setup in Malaysia was also a direct result of political altercation between Japan and China over a decade ago. So, here we are again. Well, sort of.

Japan’s government is now said to be exploring test mining of rare-earth-rich mud from the deep seabed off Minamitori Island. The test will be conducted from 11 January to 14 February and will mark the world’s first attempt to continuously lift rare-earth mud from a depth of around 6,000 meters on to a vessel.

According to the program director, the aim is to lift 350 metric tons of rare-earth mud per day. All the while, they will be monitoring the potential environmental impact both onboard and on the seabed throughout the operation.

As things stand, there is no production target that has been set. But if the project is a success, full-scale mining trial could begin in February 2027.

As a reminder, Japan’s efforts here are part and parcel to keep diversifying on rare earth minerals supply. And the big issue is not so much seeking the supply but rather the processing capabilities. And this is where the corridor with Australia that enabled the building of the Lynas plant in Malaysia – the largest rare earth processing facility outside of China – might come in.

Yes, that’s the one that also saw China kick up a fuss when Trump came to visit.

But this time, China could be more directly involved in the matter. During the period earlier this year when Japan was conducting rare earth surveys within its exclusive economic zone (EEZ) around Minamitori Island, a Chinese naval fleet was reported to have entered the waters. A warning sign perhaps?

And even if not that, one can guarantee that Beijing won’t be happy with the whole ordeal – especially to any country that looks to reduce their ace card of using rare earth minerals supply as part of geopolitical leverage.

This article was written by Justin Low at investinglive.com.

If it hasn’t been said already, the reasons underpinning the gold rally are bountiful. And with the precious metal continuing to soar to new heights towards the end of the year, the question is can it keep up the good form for a third straight year running?

In that lieu, one key driver that could really send gold into overdrive in 2026 is the rise in fiscal concerns in major economies. In particular, gold could really hit the jackpot here as the stars align with the US, Europe, and Japan all needing to fight for fiscal survival.

The case scenario in the US is one that market punters have talked about for a long time now. As the fiscal deficit continues to blow up, it continues to raise a major concern with the US’ debt-to-GDP ratio hitting over 120%.

As things continue down this path, the main worry is that the US is pretty much stuck in a ‘debt spiral’. And that is one that lawmakers and policymakers will find it tough to get out of.

Trump’s recent policies are aimed to try and address that somewhat. In trying to address the deficit, he knows that he has to somehow increase federal revenue. And that is where tariffs come in.

I mean, that is what happens when for every dollar the government collects, they pretty much have to spend nearly 20% on interest costs before allocating the money to serve their agenda.

And that’s also in part the reason why Trump wants to pressure the Fed into cutting rates further. That is to reduce the cost to service this debt. But in turn, that turns into a major risk for the US dollar and it is one that we’re seeing the greenback punished for this year.

And amid the de-dollarisation and debasement trade, it still stands to reason why investors will want to seek gold as a suitable alternative.

Then, there is also Europe.

The case in the euro area is defined as a push and pull between France and Germany. The former is already a fiscal red flag for the region with French bond yields even trading above Italy’s at this stage. And that says a lot considering how Italy has always been the poster boy for bad fiscal reputation in Europe.

Amid a flagging economy and political uncertainty, France is in a crippled state and is one that will continue to pose worries to the euro area next year.

Meanwhile, Germany is quite the opposite. They have decided to loosen the purse strings and push forward with the end of austerity. From last week: Germany unveils historic €512 billion issuance for 2026

That puts the ECB in a bit of a pickle. The central bank has to strike a balance in keeping rates in a sweet spot, just low enough to keep France out of trouble but high enough to not see a debasement of the euro currency as Germany begins to borrow its way out of stagflation.

And lastly, there’s Japan. New prime minister, Sanae Takaichi, is a big fiscal dove and her plan is to try and go big on spending to “grow” their way out of a 250% debt-to-GDP ratio. Well, good luck with that.

The issue with her plan is that it runs against what the BOJ has been doing recently and what the central bank plans to do next year. And that is already evident in the December monetary policy decision this month.

The BOJ wants to normalise policy further but in raising interest rates, it is incurring more cost to the government in trying to services this massive and ballooning debt.

Amid all this, the Japanese yen is the one being caught in the crossfire and being sacrificed in order to try and allow for Takaichi’s ambitions to take flight. But in losing its status as a traditional haven currency and a slow rush to the exits, it once again opens up a debasement angle and one for gold to take advantage of.

The trio of fiscal predicaments above highlight a continued opportunity for gold traders to work with come next year. Even if major central banks might put a stop to rate cuts, the fact that central bank demand is still strong – with good reason – stands to reason that gold might not lose too much shine.

A case of a debasement of currencies and a ‘rebasement’ of gold seems to be a strong reason for gold to keep the rally going. But as always in trading, do be wary of any consensus trade. And when something goes too far, too fast, there is always a scope for pullbacks.

This article was written by Justin Low at investinglive.com.