Markets end year on quiet note as metals surge

Precious metals enjoy stellar year

​Gold, silver and  platinum have all pushed to record highs, capping off what has been an exceptional year for precious metals. Gold has risen about 70% in 2024, while silver has surged around 150%, marking their strongest annual performances since 1979.

​The rally has been driven by expectations of US rate cuts in 2025, combined with ongoing geopolitical tensions that have boosted demand for safe-haven assets. Lower rates reduce the opportunity cost of holding non-yielding assets like gold.

​Silver's outperformance reflects its dual role as both a precious and industrial metal. While gold attracts safe-haven flows, silver benefits from industrial demand in electronics and solar panels, amplifying gains when both drivers align.

​Platinum has also extended sharp gains, benefiting from supply constraints and demand from the automotive sector. The metal's performance underscores the broader strength across the precious metals complex.

​Copper strength continues

​Copper moved above $12,000.00 a tonne, putting it on course for its best annual performance since 2009. The industrial metal has been supported by tight supply conditions and strong demand linked to the energy transition.

​Copper is essential for electric vehicles, renewable energy infrastructure and power grids. As governments push green energy initiatives, demand for the metal has intensified, creating supply bottlenecks that have pushed prices higher.

​The move above $12,000.00 represents a significant technical breakout, with the metal clearing resistance that had capped gains for several months. This suggests the bull case for copper remains intact despite recent economic uncertainty.

​Supply constraints are likely to persist, with new mine development facing long lead times and environmental challenges. This structural deficit underpins the bullish outlook for copper, making it attractive for traders seeking exposure to the energy transition theme.

​Sterling steady as year ends

​The British pound held above $1.35, close to its strongest level since October, with currency moves muted in thin pre-holiday trading. Sterling has enjoyed a solid year, supported by the UK economy's resilience and the Bank of England's (BoE) cautious approach to rate cuts.

​The currency has benefited from improved sentiment towards UK assets, with investors reassessing the outlook following better-than-expected growth data. However, with liquidity thinning ahead of Christmas, significant moves in either direction seem unlikely this week.

​Forex trading volumes typically drop sharply in the final week of the year, as traders close books and take time off. This can lead to exaggerated price swings on low volume, so caution is warranted for those with open positions.

​Looking ahead, sterling's ability to hold above $1.35 into the new year will depend on economic data and central bank policy. The BoE faces a delicate balancing act between supporting growth and controlling inflation.

​Equities mark time in thin trading

​UK stocks were little changed overall, with defensive names steady as investors marked time ahead of year-end. 

​Asian equities edged higher, with Japan's Nikkei 225 up modestly and South Korea set to finish the year up more than 70%. The divergence between Asian and European markets reflects different economic dynamics and policy responses.

​The S&P 500 closed at a record, led by growth and technology stocks after strong US gross domestic product (GDP) data for the third quarter (Q3). The rally in US equities has been relentless, driven by enthusiasm for artificial intelligence and expectations of a soft landing.

​Year-end trading is typically subdued, with many institutional investors having already closed their books. Light volumes can lead to choppy price action, so traders should be mindful of the risks of holding positions over the holiday period.

​BP sells Castrol stake

​BP agreed to sell a 65% stake in Castrol to Stonepeak for an enterprise value of $10 billion, generating about $6 billion to reduce net debt. The deal represents a significant step in BP's strategy to streamline operations and strengthen its balance sheet.

​Castrol has been a solid performer for BP, but the company has been under pressure to focus on its core operations and reduce debt levels. The sale will provide substantial cash to accelerate this process.

​The transaction values Castrol at a healthy multiple, suggesting buyers remain confident in the lubricants business despite concerns about the transition to electric vehicles. Castrol has been adapting its product range to meet changing demand.

​For BP shareholders, the deal should be viewed positively. It reduces debt while retaining a 35% stake, allowing the company to benefit from any future upside in Castrol's performance while redeploying capital elsewhere.

​Year-end backdrop

​Risk assets remained supported by expectations of easier monetary policy next year, though trading volumes were light and price moves exaggerated. Government bond markets were quiet, with yields largely stable as liquidity thinned ahead of Christmas.

​The benign conditions reflect a market that has largely priced in the Federal Reserve's (Fed) pivot towards rate cuts in 2025. Investors are betting that inflation will continue to moderate, allowing central banks to ease policy without reigniting price pressures.

​However, the calm may prove deceptive. Light trading volumes can mask underlying vulnerabilities, and any unexpected news in early January could trigger sharp moves.