(Updates prices with early European trading)

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Precious metals volatile on Ukraine peace deal uncertainty

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Fed minutes in focus this week as traders ponder US rates

outlook

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Dollar stays under pressure on rate cut wagers

By Naomi Rovnick and Ankur Banerjee

LONDON/SINGAPORE, Dec 29 (Reuters) - Global stocks were

on track to end 2025 at record highs on Monday, while the

dollar hovered near its lowest in almost three months,

reflecting investors' expectations of further Federal Reserve

interest rate cuts next year.

The MSCI's world equity gauge was flat in early

European trading as markets assessed comments from U.S.

President Donald Trump that he and Ukrainian President Volodymyr

Zelenskiy were ‌getting "a lot closer" to a deal that could end

the Ukraine war.

That left the global stock benchmark with an almost 21%

year-to-date gain after Wall Street hit a record high on

Friday and European shares touched an intraday record

high in early ​trades on Monday.

INVESTORS ARE RELUCTANT TO DEFLATE POSSIBLE AI BUBBLE

As the year ends, investors retain expectations U.S. rates

will fall and are reluctant to sell out of ‍a potential bubble in

AI stocks as long as monetary policy remains supportive. They

have also increased their exposure to safe-haven ⁠gold to hedge

their bullish bets.

"We're not seeing ⁠runaway inflation risk as a base case so

we're still thinking the Fed has room to cut," Fidelity

International multi-asset portfolio manager Becky Qin said.

"So you can still build a case for a reasonably strong

backdrop for risk assets."

Investors ‌took some profits on precious metals on Monday. Gold

dropped 1.1% to $4,484 an ounce but stayed ​on track for

its biggest annual gain since 1979 with a rise of over 70%.

Silver climbed above the $80-per-ounce-mark for the first

time in volatile trading on Monday before dropping back to

$76.14.

Charu Chanana, chief investment strategist at Saxo, said

precious metals have been lifted this year by a mix ⁠of rate-cut

tailwinds and hedging against geopolitical and fiscal

uncertainty.

"Add supply worries and the move ‍has turned parabolic. But

the ​late-year, near-vertical surge, especially in silver, also

raises the risk of higher volatility. Near-term, the risk is

technical and positioning-led," Chanana said.

Three-month copper on the London Metal Exchange was

3.27% higher at $12,560 per metric ton, having set a record of

$12,960 earlier on Monday.

US PRESIDENT SAYS UKRAINE TALKS ARE POSITIVE

Geopolitics was in ‍focus on Monday after Trump met Zelenskiy in

Florida for what the U.S. President described as positive talks,

although no agreement on bringing peace to Ukraine has yet been

reached.

China's military, meanwhile, moved army, naval, air force

and artillery units around Taiwan on Monday for its "Justice

Mission 2025" drills, as the island said it would defend its

democracy.

MSCI's broadest index of Asia-Pacific shares

was 0.4% higher on Monday in a strong start to the final week of

the year. Most Asian markets have recorded double-digit gains

for 2025 as markets bet on the prospects for AI and set aside

concerns about the impact of trade tariffs.

South Korea's Kospi rose 2.2% on Monday, on pace for

its best year since 1999 after investors ​spread their AI bets

beyond ‍Wall Street in a trend that has also lifted Taiwanese

equities 25% higher year-to-date.

The focus of investors in this holiday-shortened week will

turn on Tuesday to the publication of the minutes of the Fed's

latest meeting.

The U.S. central bank cut its main funds rate to a range of

3.5%-3.75% this month and ​money markets are pricing two further

quarter-point cuts by September.

Trump, who favours lower borrowing costs, said last week that

the replacement for outgoing Fed chair Jay Powell would not be

anyone who disagrees with him.

DOLLAR FLAILS AS FRAIL YEN FINDS SUPPORT

The dollar, flat against a basket of major currencies

including the euro and the Japanese yen on Monday, stuck close

to its weakest level since October.

The yen firmed 0.3% to 156.14 per U.S. dollar after a

summary of opinions from the Bank of Japan's policy meeting in

December showed many board members saw the need for further rate

hikes to contain inflation.

That offered some support for the Japanese currency after it

slid to 157.78 on December 19, prompting expectations of BoJ

intervention.

In fixed income markets on Monday, Ukraine uncertainty

supported euro zone government bonds, with ​10-year German Bund

yields edging almost 3 basis points lower to around 2.84%

as the prices of the benchmark debt instruments

firmed.

That German yield was on track to end the year about 50 bps

higher, however, following stimulus spending pledges and the

European Central Bank's strong signals that its rate-cutting

cycle has drawn to a close. Benchmark Treasury yields

were 3 bps lower at just over 4.1%.

Brent Crude futures rose 1% to $61.26 a barrel in

volatile trading, ‍having dropped more than 2% on Friday ahead of

Trump and Zelenskiy's talks.