Inflationary undercurrents surge: metals soar, energy shortages intensify, and rate cut expectations face a rewrite

【BlockBeats】In mid-January, the financial markets seem stable on the surface, but beneath the surface, inflation risks are accelerating at the grassroots level of asset pricing.

Gold and silver continue their rally from the beginning of the year, while industrial metals like copper and steel also hit new highs—things that shouldn't all surge simultaneously are now all targeting the same direction. AI infrastructure development is driving energy and raw material demand to unprecedented levels—electricity for data centers, chip cooling, server heat dissipation… each link is competing for limited physical resources. Geopolitical risks haven't eased either; tensions between the US and Iran remain, and energy supply concerns persist, repeatedly amplifying the tail risks of inflation.

What’s truly tricky is that these changes haven't fully reflected in bond and stock prices yet. Some institutions are already adjusting their asset allocations privately, but the overall market is still dreaming.

Deeper uncertainties stem from the Federal Reserve. The Fed chair will change in May, which is itself a suspenseful event. Markets worry that if the new chair is perceived as dovish, it could undermine the credibility of inflation control—simply put, the more dovish the stance, the less the market believes you can keep prices in check. Several Fed officials have already signaled: once the independence of the central bank is questioned, inflation expectations can quickly spiral out of control, and interest rates will be forced to stay higher, with no retreat in sight.

So the question arises. Last year, the market widely expected two rate cuts in 2025, but that expectation no longer holds.

An analyst from an exchange pointed out that the core mismatch in the current market is “the growth story is still being told, but inflation risks are not properly priced in.” Once the 10-year US Treasury yield effectively breaks through 4.3%, it means that inflation concerns have truly shifted from expectations on paper to market actions. By then, the pace and frequency of rate cuts will inevitably be revised downward. The key issue in 2026 is not whether the Fed will loosen policy, but whether it can still maintain its dominance in fighting inflation—that is the core gamble in asset allocation.