(Source: Merlea Macro Matters)

Summary

Global Trade Realignment: The Fallout from U.S. Tariffs

As we enter the final quarter of 2025, the global economy is showing mixed signals. Growth remains positive in many regions, but momentum is slowing.

The IMF projects global GDP growth at 3.13% for the year, with Q4 reflecting tighter financial conditions and geopolitical uncertainty. India leads with 6.2% growth, followed by China at 3.95%, while the U.S. is expected to grow at 1.83%. The UK and Germany face weaker outlooks, with Germany contracting slightly. Inflation remains elevated in the U.S. and UK, while Australia’s Q3 CPI came in at 2.1%, reflecting moderate price pressures.

Equity markets have rebounded strongly since mid-year, but risks are rising. Valuations are stretched, and earnings growth is slowing. Analysts warn that tariff uncertainty and policy shifts could trigger renewed volatility. International equities, particularly in Europe, offer better value, while Australia’s ASX 200 continues to benefit from resource demand.

A major theme this quarter is the realignment of global trade. In April, the U.S. imposed sweeping tariffs—10% on nearly all imports and up to 50% on targeted nations. This triggered a wave of strategic recalibration. Countries are forging new alliances and reducing reliance on U.S. trade.

BRICS nations are expanding cooperation in energy, digital payments, and infrastructure. China is deepening ties with Africa and ASEAN, while South Korea and Singapore are pivoting toward South Asia and the Middle East. A coalition of 11 countries, including Russia and Kazakhstan, has announced plans to abandon the U.S. dollar in trade, opting instead for regional currencies and digital alternatives. These shifts suggest a move toward multipolar trade blocs and regional supply chains. While the U.S. has secured some bilateral deals, it risks growing isolation in multilateral frameworks. The long-term outcome may be a fractured global system, with overlapping spheres of influence and reduced U.S. dominance.

Bonds

Rising Fiscal Indebtedness and the Surge in Long-Dated Bond Yields: A Growing Risk for Global Markets

In 2025, rising fiscal indebtedness and persistent budget deficits across major economies—including the United States, United Kingdom, France, and Japan—are exerting significant upward pressure on long-dated government bond yields. This trend is becoming increasingly evident, with 30-year bond yields in the UK and France recently breaking out to multi-decade highs. As of August 26, 2025, the UK 30-year gilt yield stands at 5.55%, marking a 24.65% increase year-on-year. Similarly, France’s 30-year bond yield has reached 4.40%, up 0.83% over the past year.

In the United States, the 10-year Treasury yield is currently 4.26%, while the 30-year yield has climbed to 4.89%. Although these yields remain below their 2023 peaks, they are hovering near critical resistance levels. A breakout above 5.1% on the US 30-year could trigger a surge in the 10-year yield, potentially destabilizing markets that are currently pricing in rate cuts and declining inflation.

The rise in long-dated yields is driven by several interlinked factors:

1. 1. Increased Bond Supply: Governments are issuing more debt to finance expansive fiscal programs, especially in the wake of post-pandemic recovery and geopolitical tensions.
   2. Persistent Inflation: Despite central bank rate cuts, inflation remains sticky in economies like the UK and US, eroding investor confidence in long-term fixed-income securities.
   3. Quantitative Tightening: Central banks, including the Bank of England and the Federal Reserve, are reducing their bond holdings, further pressuring yields upward.
   4. Institutional Buyer Strike: Traditional buyers of long-dated bonds—such as pension funds and insurers—are pulling back due to structural changes and regulatory reforms.

These dynamics have created a fragile environment for long-duration assets. The bond market is showing signs of stress, with yield curve steepening and volatility rising. In August 2025, 30-year yields in Europe and the UK hit new post-COVID highs, reflecting deepening concerns about fiscal sustainability and central bank credibility.

Political developments are also adding to the uncertainty. In the US, former President Donald Trump’s efforts to appoint dovish officials to the Federal Reserve could undermine investor confidence in the Fed’s independence, potentially triggering a selloff in Treasuries.

For investors, this environment presents both risks and opportunities. Rising yields typically lead to falling bond prices, which can hurt portfolios heavily weighted in long-duration assets. However, assets like gold may benefit from this uncertainty. The article suggests that spot gold could remain resilient even if equities face a September correction, due to its role as a hedge against inflation and financial instability.

In conclusion, the surge in long-dated bond yields is a global phenomenon rooted in fiscal expansion, inflation persistence, and structural shifts in bond demand. While the US market has remained relatively stable, the risk of a breakout looms large. Investors should monitor yield movements closely and consider adjusting their portfolios to mitigate duration risk and capitalize on safe-haven assets.

Listed Property

Australian A-REIT sector, which is showing signs of renewed strength and stability following a challenging period.

The sector has responded positively to recent interest rate cuts by the Reserve Bank of Australia, with the S&P/ASX 300 A-REIT Index rising 28% since its April lows. This rebound reflects improving investor sentiment, stabilising valuations, and a more favourable macroeconomic backdrop.

Commercial real estate appears to be at an inflection point. Key players such as Charter Hall, Mirvac, Stockland, Lendlease, and Dexus are repositioning their portfolios to take advantage of emerging opportunities.

While the office sector continues to grapple with elevated vacancy rates, there are green shoots appearing. Demand for premium-grade office space is returning, particularly in CBD locations, as businesses seek high-quality environments to support hybrid work models.

Retail REITs are benefiting from strong consumer spending and high occupancy rates. Scentre Group, for example, is reporting near-full occupancy and solid rental growth. Industrial and logistics assets remain the standout performers, with vacancy rates near historic lows and limited new supply due to elevated construction costs. This has supported rental growth and asset values across the sector.

Residential property is also showing bullish momentum. A chronic shortage of housing supply, combined with recent rate cuts, is fuelling demand and supporting development activity. Australia’s population growth is adding further pressure to an already tight housing market, reinforcing the long-term fundamentals for residential-focused REITs.

Capitalisation rates are beginning to stabilise and, in some cases, compress. Office assets are currently trading at cap rates between 5.00% and 5.75%, while prime retail assets are in the 5.25% to 6.00% range. Industrial and logistics assets continue to command the lowest cap rates, typically between 4.25% and 5.00%, reflecting strong demand and limited supply.

CBRE forecasts a further 100 basis point drop in the 10-year real bond rate, which could drive additional cap rate compression across all sectors.

That said, several risk factors remain on the radar. Interest rate volatility could impact valuations and funding costs. Office vacancies, while improving, still pose a challenge. Retail REITs remain sensitive to shifts in consumer sentiment, and construction cost inflation continues to limit new development activity. Additionally, regulatory uncertainty around planning and approvals may affect project pipelines.

In summary, the Australian A-REIT sector is entering Q4 with positive momentum. Falling interest rates, demographic tailwinds, and sector-specific catalysts are creating a favourable environment for long-term investment. While challenges remain in certain segments, the overall outlook is increasingly constructive.

Australian Equities

Australia enters the final quarter of 2025 with a mixed economic outlook. While the macro backdrop remains broadly supportive, recent data has introduced new complexities.

The Reserve Bank of Australia has delivered three rate cuts this year, bringing the cash rate to 3.60%, aimed at supporting growth and easing financial conditions. However, a surprise jump in inflation in July—headline CPI rising to 2.8% and trimmed mean inflation to 2.7%—has tempered expectations for further easing. The RBA is now expected to pause rate cuts until at least November, as it reassesses the persistence of price pressures.

Despite this, household spending has maintained its recovery momentum. Both non-discretionary (4.3%) and discretionary (1.7%) spending grew in real terms during the June quarter. Notably, discretionary spending reversed its March quarter decline, driven by a robust 7.9% surge in recreation and culture. This rebound reflects easing inflation and improving consumer confidence, suggesting that households are regaining their appetite for leisure and lifestyle-related consumption.

However, structural challenges persist. Australia’s productivity growth remains weak, with the RBA downgrading its medium-term forecast to just 0.7% per annum. This slowdown is partly due to an investment slump. Despite a surge in capital expenditure over the past two years, private sector reinvestment rates remain at 8.2%, well below historical peaks. A shift in investment composition—strong building activity but weakening machinery and equipment investment—has led to ‘capital shallowing’, where the economy becomes more labour-intensive. The Productivity Commission has flagged low investment as a key contributor to Australia’s long-term productivity malaise.

Energy costs continue to pressure the manufacturing sector. Although global energy markets have stabilised, gas prices remain 40% above pre-2019 levels. This has disproportionately affected chemicals and metals manufacturers, which have seen declining output since 2022. Elevated input costs are squeezing margins and limiting competitiveness.

Labour market data offers a mixed picture. The unemployment rate fell to 4.2% in June, in line with RBA forecasts. However, youth unemployment is once again nearing 10%, highlighting fragility beneath headline figures. With minimal private sector job creation, employment growth has relied heavily on publicly funded sectors.

Wages rose by 3.4% annually in the June quarter, outpacing inflation and delivering real income gains. Public sector wages grew slightly faster than private sector wages. While this is encouraging, the RBA cautions that sustained real wage growth depends on productivity improvements. Without such gains, wage growth risks fuelling inflation and eroding purchasing power.

Equity markets remain resilient. The All-Ordinaries Index trades at a forward P/E of 19.4x, above its long-term average. Mining and industrials have benefited from a weaker USD and Chinese stimulus.

However, elevated valuations suggest a more defensive tilt may be prudent. Utilities, healthcare, consumer staples, communication services, and infrastructure-linked assets offer stability and downside protection.

America

The U.S. economy continues to show signs of resilience, but cracks are becoming more visible beneath the surface. Growth remains positive, though momentum is uneven, and the economy is clearly in the late expansion phase of the business cycle.

In a notable upgrade, the Commerce Department reported that GDP grew at a 3.3% annual pace in Q2 2025, up from the initial 3.0% estimate. This rebound follows a 0.5% contraction in Q1, the first decline in three years. The Q1 drop was largely driven by a surge in imports as businesses rushed to stockpile foreign goods ahead of Trump’s sweeping tariffs. That trend reversed in Q2, with imports falling at a 29.8% annual rate, contributing over 5 percentage points to GDP growth.

Consumer spending, which accounts for roughly 70% of GDP, grew at a 1.6% annual pace in Q2—an improvement from the 0.5% pace in Q1 and slightly above the initial 1.4% estimate. While still subdued, this uptick reflects modest resilience in household demand.

Private investment, however, remains a concern. Despite an upward revision, it contracted at a 13.8% annual rate, the steepest decline since the pandemic’s peak in 2020. A sharp drawdown in inventories alone shaved 3.3 percentage points off Q2 growth. Federal government spending also declined for a second consecutive quarter, falling 4.7% after a 4.6% drop in Q1. A key measure of underlying economic strength—excluding volatile components like exports, inventories, and government spending—rose 1.9% in Q2, matching Q1. This suggests that core domestic demand remains stable, even amid external shocks.

Tariffs and Trade Policy

Since returning to office, President Trump has radically reshaped U.S. trade policy, imposing double-digit tariffs on imports from nearly every major trading partner, including a 50% levy on Indian goods. These measures target sectors such as textiles, chemicals, and autos, and are intended to protect the domestic industry and fund recent tax cuts.

While tariffs have boosted short-term GDP by curbing imports, economists warn of longer-term risks. Tariffs raise costs for U.S. businesses and consumers, potentially stoking inflation and reducing efficiency. The erratic nature of Trump’s tariff announcements—often reversed or modified without warning—has created uncertainty, discouraged investment and hiring.

Federal Reserve and Interest Rates

The Federal Reserve has held rates steady at 4.25%–4.50% but softening economic indicators and political pressure have increased expectations for a rate cut in September. Trump’s repeated threats to replace Chair Jerome Powell have unsettled markets and raised concerns about the Fed’s independence. Preserving central bank autonomy remains critical to maintaining investor confidence and financial stability.

USD Outlook

The U.S. dollar has continued its decline, with the DXY index down over 10% year-to-date, pressured by trade tensions, capital outflows, and expectations of monetary easing. While a technical rebound is possible, structural headwinds—including reduced foreign demand for U.S. assets—suggest further weakness ahead.

Stock Market and Capital Flows

Equity markets remain elevated, with major indices near record highs. However, valuations are stretched, and gains are increasingly concentrated in a handful of tech giants. The S&P 500’s rally has been driven largely by the Magnificent 7, while broader participation has weakened. Rising bond yields—now around 4.4% on the 10-year Treasury—could pose risks to high-duration sectors if they breach 4.5%.

Foreign capital flows into U.S. equities have slowed, reflecting concerns over trade policy, Fed independence, and currency risk. European and Asian markets have seen increased inflows as investors diversify away from U.S. assets.

Conclusion

Looking ahead, the U.S. economy may continue to grow, but the foundation is increasingly fragile. Tariff-induced distortions, political interference in monetary policy, and stretched asset valuations pose significant risks. Structural reforms, a more predictable trade framework, and a commitment to central bank independence will be essential to sustaining momentum and mitigating downside risks in the quarters to come.

Europe

Eurozone: Recovery Gains Momentum Amid Political and Geopolitical Uncertainty

The Eurozone economy is showing signs of a cautious recovery, with GDP projected to grow 0.9% in 2025. Inflation is easing, business confidence is improving, and the European Central Bank has cut its deposit rate to 2.0%. Employment remains strong, with unemployment at a record low of 6.2%, and real incomes are rising.

Recent data adds to the optimism. The HCOB Flash Eurozone Composite PMI rose to 51.1 in August, its highest level in 15 months, marking the third consecutive monthly improvement. New orders increased for the first time since May 2024, and manufacturing returned to expansion territory for the first time in over three years. Services activity continued to grow, albeit at a slower pace.

Germany led the rebound with its fastest growth since March, driven by manufacturing. France’s downturn eased, and hiring across the bloc accelerated, especially in services. However, inflation pressures intensified, with input costs and output prices rising at the fastest pace in months—raising concerns for ECB policymakers.

Political uncertainty remains a drag. France’s snap election produced no clear majority, and Germany’s February election brought the CDU/CSU back to power under Friedrich Merz. His coalition with the SPD signals a shift in EU trade policy, with renewed efforts to finalise deals with Mercosur (South American trade bloc), Mexico, and Southeast Asia, and a tougher stance on China and Russia.

Domestically, Germany may seek to relax its debt brake to fund infrastructure and defence, though resistance remains. Geopolitical tensions and renewed U.S. tariffs under President Trump continue to disrupt trade and add volatility to European markets.

The ECB’s Financial Stability Review warns of elevated policy uncertainty and stretched asset valuations. Despite these risks, European equities remain resilient. Investors are drawn to attractive valuations and a stable monetary environment, with mid-cap industrials and defence stocks benefiting from capital inflows.

United Kingdom

Fragile Recovery and Fiscal Tightrope

The UK economy is in a fragile recovery, with GDP growth revised down to 0.8% for both 2025 and 2026. Services remain the backbone of growth, while manufacturing and construction struggle. Inflation is expected to peak at 3.6% in autumn before easing to 2% by mid-2026. The Bank of England has cut rates to 4.0%, with further easing expected. The labour market is softening, and unemployment is projected to reach 4.8%. Fiscal pressures are mounting, with the budget deficit at £12.8 billion and debt at 96% of GDP. Political instability and policy reversals have shaken markets, pushing gilt yields higher and weakening sterling.

Trade uncertainty persists, with U.S. tariffs affecting UK firms. Equities remain undervalued, and infrastructure investment may support mid-cap performance, but sentiment remains cautious.

The Eurozone and UK are both navigating fragile recoveries shaped by inflation, monetary shifts, and political uncertainty. While the Eurozone benefits from coordinated investment and easing financial conditions, domestic political fragmentation and global trade tensions pose risks. The UK faces fiscal strain and policy volatility, with inflation and trade pressures complicating its recovery.

Japan

Stabilisation Amid Trade Pressures and Fiscal Challenges

Japan’s economy enters Q4 2025 at a delicate juncture. Following a mild contraction in Q1, signs of stabilisation are emerging, but the recovery remains fragile. Consumer confidence has improved, and domestic investment—particularly in semiconductors—remains strong. However, inflation continues to weigh on real incomes, and external trade pressures are intensifying.

Fiscal Policy Outlook

The government is under pressure to compile an extra budget to offset the impact of U.S. tariffs and elevated inflation. While fiscal stimulus remains a key support, Japan’s high public debt and aging demographics are raising concerns about long-term sustainability. Structural reforms aimed at boosting productivity and human capital investment are central to the policy debate.

Trade Challenges

Japan faces mounting pressure from U.S. trade policy. A 25% tariff on automobiles and a 10% baseline tariff on other goods are expected to reduce GDP by up to 0.8% this year. Auto exports have declined sharply, impacting production, employment, and investment across the supply chain. Other export-oriented sectors—electronics, machinery, and steel—are also vulnerable, with firms revising earnings forecasts and delaying capital expenditures.

Bond Market Volatility and Global Impact

Japan’s 30-year government bond yield surged to a record high of 3.2% in May 2025, up 100 basis points from April1. This spike follows the Bank of Japan’s exit from ultra-easy monetary policy, including the end of yield curve control and the start of quantitative tightening. The BoJ has reduced its balance sheet by ¥21 trillion and plans to halve monthly bond purchases by March 2026.

Investor demand for long-term Japanese debt has weakened, with life insurers trimming holdings amid volatility and uncertainty. The steepening yield curve reflects rising term premiums and concerns over fiscal sustainability.

Globally, the surge in JGB yields has triggered a ripple effect. The 30-year U.S. Treasury yield rose to 5.15%, and German 30-year yields hit 3.2%, as investors reassess risk and inflation expectations. Japan’s role as a major holder of foreign sovereign debt means any shift in its investment strategy—such as repatriating funds to chase higher domestic yields—could pressure global bond markets and raise borrowing costs.

The unwinding of yen-funded carry trades adds further risk. As Japanese yields rise, the incentive to borrow in yen and invest abroad diminishes, prompting capital flows back into Japan. This dynamic could strengthen the yen, disrupt currency markets, and reduce liquidity in emerging markets that have relied on Japanese investment.

Stock Market Resilience

Despite economic headwinds, Japan’s stock market has outperformed global peers in 2025. The Nikkei and TOPIX indices have benefited from corporate governance reforms, improved shareholder returns, and strong foreign capital inflows. Investors are increasingly drawn to Japan’s attractive valuations and sectoral strength in semiconductors, automation, and consumer electronics.

Outlook

Japan’s near-term growth is expected to remain moderate, supported by accommodative monetary policy and resilient domestic investment. However, inflation, trade disruptions, and bond market volatility pose ongoing risks. The path forward will depend on effective policy coordination, structural reform, and global economic stabilisation. While recession risks persist, Japan’s strong corporate balance sheets and stable financial system provide a foundation for recovery.

China

Mid-Cycle Transition, Strategic Realignments, and Policy Countermeasures

China’s economy is entering a phase of moderated growth, with GDP expected to slow to 4.8% in 2025, followed by further deceleration in 2026. While the first half of the year saw robust performance driven by front-loaded exports and consumption, momentum is weakening due to persistent deflationary pressures, property sector fragility, and rising external uncertainty.

China is currently in a mid-cycle expansion phase. The economy has moved beyond its post-COVID recovery and early expansion, supported by strong industrial output and policy stimulus. However, signs of deceleration are emerging. Deflationary pressures, weakening exports, and property sector stress suggest that China is transitioning toward a more mature phase of the cycle. Without stronger domestic demand or global recovery, the risk of entering a late-cycle slowdown by mid-2026 remains.

Trade Challenges and U.S. Tariff Response

The Trump administration’s renewed tariff campaign—raising duties on Chinese goods to an average of 30%—has prompted Beijing to deploy a broad mix of countermeasures. These tariffs are expected to shave up to 0.7 percentage points off China’s GDP in 2025, with the auto, electronics, and machinery sectors most exposed. To cushion the blow, China has weakened the yuan to boost export competitiveness, with the offshore yuan reaching a six-month low.

• Cut interest rates and the reserve requirement ratio, easing monetary conditions to support lending and investment.
• Raised the budget deficit target to 4% of GDP, the highest in decades, signalling aggressive fiscal expansion.
• Issued ¥1.3 trillion in ultra-long special treasury bonds and ¥4.4 trillion in local government special debt to fund infrastructure and social programs.
• Recapitalized major state banks with ¥500 billion to ensure liquidity and credit availability.

These measures aim to stabilise domestic demand, support vulnerable sectors, and offset the drag from reduced U.S. trade.

Domestic Trends and Structural Challenges

Private consumption remains a key growth driver but is constrained by weak property market sentiment and high precautionary savings. Consumer subsidies totalling ¥300 billion have been introduced to stimulate spending on electric vehicles, appliances, and household goods. However, household consumption still accounts for less than 40% of GDP—well below global averages.

The property sector continues to be a major drag, with new home starts and land sales down 60–70% from their peak. Stabilisation is expected in top-tier cities by mid-2026, but a nationwide recovery remains elusive.

Stock Market and Capital Flows

China’s equity markets have shown resilience in 2025. The Shanghai Composite and CSI 300 indices have posted modest gains, supported by foreign inflows, corporate governance reforms, and policy support. Valuations remain attractive, especially in consumer tech, healthcare, and industrial automation. However, investor sentiment is fragile due to regulatory unpredictability and geopolitical tensions.

Geopolitical Strategy and India Alliance

China has responded diplomatically by deepening ties with India amid strained U.S.–India relations. Recent agreements have reopened border trade and eased export restrictions, signalling a cautious thaw. While strategic rivalry remains, both nations are exploring pragmatic cooperation in trade and infrastructure.

China’s economic strategy in late 2025 reflects a balancing act between countering external shocks and addressing domestic weaknesses. With a mix of monetary easing, fiscal expansion, and geopolitical realignment, Beijing is working to sustain growth amid mounting global headwinds. Its current position in the business cycle suggests resilience, but without stronger reforms or a rebound in global demand, China may face deeper slowdown risks in 2026.

Emerging Markets in Flux: Navigating Trade Shifts and Commodity Surges

Emerging markets (EMs) are navigating a complex global landscape shaped by evolving trade policies, currency fluctuations, and geopolitical tensions. Despite these headwinds, EMs continue to demonstrate resilience, with GDP growth projected at 3.8% in 2025. This performance outpaces advanced economies, although it remains below historical averages.

The global trade environment remains turbulent. The Trump administration’s tariff campaign has pushed the average effective U.S. tariff rate to 15.8%, with some sectors—such as steel and aluminum—facing rates as high as 50%. Export-reliant EMs like Mexico, Brazil, and Colombia are feeling the pressure, while others such as Taiwan and South Korea may benefit from strategic exemptions linked to semiconductor investments.

In Europe-linked EMs, a modest recovery in household spending is supporting manufacturing output. Meanwhile, emerging Asia is seeing a rebound in manufacturing, particularly in sectors tied to the electronics trade cycle. Rising global demand for semiconductors and consumer electronics is fuelling this recovery.

Currency dynamics are also shifting in favour of EMs. The U.S. dollar has weakened by over 10% year-to-date, easing the burden of dollar-denominated debt and lowering hedging costs. Expectations of further rate cuts by the Federal Reserve are improving investor sentiment. EM currencies are stabilizing, and capital flows into EM equities and hard currency bonds are surging, with ETFs reaching 52-week highs.

Latin American economies continue to benefit from strong U.S. demand, which is supporting manufacturing output. However, the anticipated slowdown in U.S. growth and the lagging effects of elevated interest rates in other advanced economies introduce uncertainty. Political shifts toward market-friendly policies in regions such as Eastern Europe and South Korea are boosting investor confidence.

Looking ahead, EMs are poised to lead innovation in digital infrastructure, green energy, and fintech. Yet internal challenges—including inflation, governance issues, and fiscal constraints—will play a critical role in determining how well individual countries can capitalize on external tailwinds. Inflation across EMs is expected to ease to around 5% in 2025, down from 8% in 2024, although it remains above many central banks’ targets. Some countries, such as Turkey and Ghana, continue to face elevated inflation, while China’s inflation remains flat, reflecting subdued domestic demand.

The interest rate cycle is diverging globally. Advanced economies are beginning to ease monetary policy in response to slowing growth and disinflation. EMs, however, must balance external inflationary pressures with weaker domestic demand. Many are using this window to implement fiscal reforms and invest in structural changes, particularly in technology and clean energy. Investor sentiment is improving, with narrowing bond spreads and rising equity valuations. Private capital is becoming increasingly important as public fiscal space tightens. Despite ongoing risks, including geopolitical tensions and currency volatility, EMs remain a compelling story of adaptability and opportunity in a shifting global economy.

Global Commodity Markets Enter Q4 with Mixed Momentum

As we enter the final quarter of 2025, the global commodity landscape remains shaped by macroeconomic shifts, geopolitical tensions, and climate-related disruptions. A key factor influencing all markets is the weakening U.S. dollar, which has lost over 10% of its value this year. This depreciation is broadly supportive of commodity prices, making dollar-denominated assets more attractive to foreign buyers and boosting global demand.

Gold continues to shine, with prices currently near $3,428 per ounce. Investor appetite remains strong, driven by persistent inflation, central bank diversification, and geopolitical instability. Forecasts suggest gold could average $3,675 per ounce in Q4, with potential upside toward $4,000 by mid-2026. Central banks are expected to purchase around 900 tonnes of gold this year, with major buyers including Poland, Türkiye, India, China, and Czechia.

Silver and platinum are also performing well, with silver up nearly 20% year-to-date and platinum surging over 40%, supported by industrial demand and supply constraints.

OIL

In the oil market, volatility has defined much of 2025. Brent crude is currently trading around $76.34 per barrel, but analysts expect a decline to $70 by year-end. OPEC+ has begun unwinding voluntary production cuts, adding 548,000 barrels per day starting in August. However, increased output from non-OPEC+ producers such as the U.S., Canada, Guyana, and Brazil is expected to create a supply surplus, keeping prices subdued. The International Energy Agency projects global oil demand growth to fall below one million barrels per day in 2025, reflecting broader economic cooling.

Agricultural Commodities

Agricultural commodities are facing a mix of pressures. Climate volatility, including droughts and floods, continues to disrupt yields in key regions like Brazil, India, and the U.S. A mild La Niña is expected to affect rainfall patterns, further complicating production forecasts. Wheat prices are projected to rise 8% to around $320 per ton, driven by supply constraints and shifting export policies. Maize is expected to average $280 per ton, up 6%, supported by biofuel demand and stable global production. Rice prices, which fell sharply earlier this year, are forecast to stabilize at $475 per ton as India eases export restrictions and boosts output. Soybeans are set to rise 12% to $540 per ton, fuelled by strong demand from Asia and South America.

In summary, the weakening dollar is broadly supportive of commodity prices, especially for exporters. Gold remains a haven amid global uncertainty, oil may face downward pressure due to rising supply, and agricultural commodities present a mixed outlook shaped by climate volatility and shifting trade policies.