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Trump Temporarily Delays Military Action Against Iran, Gold–Silver Ratio Falls into a Critical Zone
- Jan 19
- 4 min read
A sharp reversal in Iran tensions, renewed focus on Federal Reserve independence, and major moves in gold, silver and currency markets defined this week’s global trading landscape.
Market Highlights
Trump's sudden shift in stance towards Iran raises questions over whether tensions in the Middle East are easing. Global institutions move to collectively defend Federal Reserve independence, while a previously "dovish" figure, Hassett, exits the stage early. Meanwhile, the gold-silver ratio declines into a historically sensitive range. State Grid announces plans for RMB 4 trillion in new investment.
Market Review
This week's market dynamics were shaped primarily by two dominant themes.
The first concerned reports surrounding a potential investigation into Federal Reserve Chair Jerome Powell and the resulting concerns over Federal Reserve independence, which repeatedly influenced the US dollar and interest rate expectations.
The second involved frequent reversals in geopolitical developments related to Iran, which became the key driver of sharp price movements across gold, silver, and crude oil markets.
Across asset classes, price action exhibited a clear rhythm of risk aversion, partial retracement, and subsequent repricing.
Precious Metals
Gold prices initially rose before retreating, as short-lived safe-haven demand gave way to renewed strength in the US dollar and risk assets.
Geopolitical tensions in the Middle East, combined with uncertainty surrounding US monetary policy, pushed gold to a fresh historical high of USD 4,642.85 per ounce. As tensions eased, prices entered a consolidation phase, with spot gold closing on Friday at USD 4,595.6 per ounce.
Silver delivered a stronger performance than gold. Prices surged to nearly USD 93.70 per ounce during the week, bringing year-to-date gains to almost 30%. However, volatility was significantly more pronounced, with prices experiencing a sharp intraday drop of nearly USD 7 during Tuesday's Asian session.
Notably, the gold-silver ratio fell below 50 for the first time since March 2012, a development that may signal increased volatility ahead. Spot silver closed Friday at USD 90.07 per ounce.
US Dollar
The US Dollar index came under notable pressure early in the week amid heightened political uncertainty. However, support later emerged from stronger-than-expected US economic data and a moderation in market expectations for near-term interest rate cuts.
Despite intermittent disruptions linked to concerns over Federal Reserve independence, the dollar strengthened overall during the week, marking its third consecutive weekly gain and closing at 99.38.
Crude Oil
Oil prices throughout the week are driven almost entirely by Iran-related developments.
In the first half of the week, concerns over domestic unrest in Iran and potential geopolitical escalation pushed oil prices to multi-month highs. As US political messaging shifted towards de-escalation and fears of supply disruption diminished, oil prices retraced all prior gains and briefly turned lower.
US Equities
US equity markets exhibited sector rotation and structurally selective gains, with overall risk sentiment remaining relatively stable.
Capital rotated out of high-valuation technology stocks into value-oriented and cyclical sectors. Technology shares—particularly semiconductors and AI-related stocks—experienced pullbacks, while small-cap and cyclical stocks outperformed.
This rotation helped propel the Russell 2000 Index to new highs.
For the week:
Dow Jones Industrial Average: -0.29%
S&P 500 Index: -0.38%
Nasdaq Composite: -0.66%
Foreign Exchange (Non-USD Currencies)
In the non-US dollar currencies, the re-emergence of the so-called "Takaichi trade" weighed heavily on the Japanese yen, with USD/JPY breaking above 159, marking its weakest level since July 2024.
The euro and the British pound generally traded within range, showing mild weakness overall. By contrast, the Australian dollar demonstrated relatively stable performance with modest upward momentum.
Separately, US Treasury Secretary Bessent commented on the Korean won, suggesting that its weakness appeared inconsistent with South Korea's underlying economic fundamentals.
Key Market Takeaways
Macro
Fed independence concerns resurfaced, increasing institutional sensitivity
CPI data supported disinflation but did not alter near-term policy caution
Geopolitical risks eased temporarily but remain unresolved
FX
USD strengthened for a 3rd consecutive week
JPY weakened sharply amid political speculation and yield differentials
EUR and GBP remained range-bound
Commodities
Gold consolidated after record highs
Gold-silver ratio fell below 50, signalling heightened instability
Oil reversed gains as Iran tensions cooled
Equities
Technology stocks corrected; cyclical and small-cap stocks outperformed
Institutional Views
Federal Reserve may become a scapegoat should the US labour market weaken – Lloyds Bank
Concerns over Federal Reserve independence could ultimately push policymakers towards a more hawkish stance – UBS
Federal Reserve is expected to remain data-dependent and is unlikely to deviate due to investigative pressure – Goldman Sachs
Inflation has not reaccelerated but remains above target, providing insufficient justification for a January rate cut – Morgan Stanley
Markets have largely priced in downside risks associated with rate cuts, leaving the US dollar potentially undervalued – Crédit Agricole
Rising fiscal concerns may lead Japanese yen to remain under pressure in the near term – Barclays
Probability of spot gold exceeding USD 5,000 per ounce this year has risen above 30% – State Street Global Advisors
Major Events: Top Developments of the Week
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CME Introduces Dynamic Margining as New 100-Ounce Silver Futures Aim to Broaden Market Access
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