UKRAINE: Zelenskyy-Iran Uncertainy Could Affect 1 Feb Ukr-US-Russ Meeting In UAE

Volatility in precious metals has resumed today, with spot silver down 5.5%, platinum down 7% and palladium down 3.5%. Gold has exhibited a touch more resilience, only 1.3% lower at typing. Both gold and silver have unwound yesterday's recovery rallies.

• Silver remains above the $70/oz figure, having tested Monday’s $70.5 low this morning.  The first important support to watch lies at $66.356, the 20-day EMA. For now, the pullback from all-time highs of over $80/oz is considered corrective.
• Gold meanwhile has pierced the 20-day EMA, currently at $4,320/oz, exposing the 50-day EMA at $4,183.5 as the next firm support.
• Yesterday, the CME announced its second margin increase in metals futures in a week, effective after COB today.
• While a net negative for precious metal prices, downside in the likes of silver may be limited by the fact a lot of recent stress (on the demand and supply side) has been centred in the physical markets.

(MNI) London - Reuters reports that the Chinese military has organised 'combat-readiness patrols' to be carried out around the contested Scarborough Shoal in the South China Sea, while the Chinese coast guard has also carried out its own patrols. The island, known as Huangyan Island in China and Panatag Shoal in the Philippines, is claimed by both countries. For years, the contested island has been a flashpoint between Chinese and Philippine vessels, with frequent clashes.

• On 29 Dec, a Chinese gov't report claimed that “illegal fishing and frequent intrusive activities” carried by the Philippines are putting the ecological condition of the island at risk. The report also highlighted the impact of military drills on the health of the reef. In the 1960s and 1970s, the Shoal was used by the US military as a firing range. Earlier in 2025, China formalised the designation of the island as a nature reserve, drawing an angry reaction from Manila and disapproval from the US.
• The navies of China, the Philippines, and the US have engaged in naval drills in the vicinity of Scarborough Shoal in recent weeks. Coming amid a major increase in military tensions in the region in recent days, any skirmish between Chinese and Philippine vessels around the Shoal continues to pose the risk of escalation via miscalculation. 

Gilt futures have been happy to follow US Treasuries this morning, with today’s domestic calendar empty. A reminder that ICE futures/options markets will close at 12:15 London today, with the exchange closed on Thursday 1 January 2026.

• Gilts are +8 ticks at 91.29, with yesterday’s 91.39 high unchallenged. Our technical analyst notes that recent price action highlights the Dec 16 low (90.50), and the Nov 27 high (91.93) as the important short-term directional triggers.
• The curve is marginally bull steeper, with 2-year yields down almost 2bps and 10-30-year yields down ~1.3bps.
• 10-year yields are currently at 4.485%, still hovering close to the bottom of a trendline drawn from the November 2022 low. Interaction with this trendline will be key heading into next year.
• SONIA futures are flat to +2.0 ticks through the blues, with the reds/greens leading.
• BOE-dated OIS almost fully price the next 25bp cut through April 2026, with just over 40bps of easing priced through year-end.
• The guidance tweaks at the December BOE decision have raised the bar to a February cut. We’d likely need to see notable downside surprises in inflation, labour market and survey data for a cut to be realised.
• For those who fancy some NYE reading in the meantime, see our latest BOE and UK inflation/labour market reviews here:
  • BOE review
  • Inflation/labour market review

Figure 1: 10-year Gilt Yields Since 2022 (Source: Bloomberg Finance L.P)