Gold charged past $5,000 US an ounce for the first time on Monday — while silver jumped to $110 an ounce — as an array of geopolitical tensions pounded the U.S. dollar.
The value of precious metals has surged in recent months as investors seek relatively safe places to invest.
“As long as fiscal dominance, geopolitical fragmentation and central bank credibility remain in question, precious metals are likely to stay at the center of this perfect storm, not just as hedges, but as alternatives,” said Daniela Hathorn, senior market analyst at Capital.com.
The U.S. dollar fell to its lowest since mid-November after Japan’s yen rose as much as 1.5 per cent in Europe. While the dollar had gained against the yen in recent months, it fell sharply in the past few days after officials in both Japan and the U.S. indicated they were prepared to intervene to strengthen the yen.
The dollar slipped to 153.88 Japanese yen from 155.01 yen; it had been trading at around 158 yen last week. However, a weak yen is generally favourable for Japanese exporters, because it helps elevate the value of their overseas earnings.
Although Japanese finance officials did not directly confirm such intervention was in the works, they confirmed they were in close co-ordination with the U.S. on currency fluctuations.
“Intervention chatter did the trick. Since Friday, the yen has staged a sharp rebound on expectations that Japanese authorities — possibly with U.S. co-ordination — would step in,” said Ipek Ozkardeskaya, a senior analyst at Swissquote.
The yen has been under relentless pressure since Sanae Takaichi took over as Japan’s prime minister in October.
Takaichi has made campaign promises to ramp up spending and cut taxes ahead of a snap election on Feb. 8, adding to concerns that Japan’s already stretched finances could become even less manageable.
That has pushed government bond yields to record highs, just as the Bank of Japan is slowly raising interest rates to tackle inflation. As the yen strengthened, Japan’s Nikkei dropped 1.75 per cent.
As U.S. dollar sinks, gold hits record
With the dollar plumbing its lowest levels against a basket of major currencies in four months and volatility picking up, gold drew in a fresh wave of capital, hitting yet another record high in what has been a blistering rally over the last six months.
Gold was last up 2.1 per cent at $5,089 US an ounce, taking its gains in January to more than 17 per cent, while silver rose almost seven per cent to $110 an ounce, up over 50 per cent this month.
“Gold clearly has a quite compelling story, in terms of central bank reserve diversification, which you would have thought gets reinforced by all of this intervention talk and events in the U.S. more generally,” Daiwa Capital Markets economist Chris Scicluna said.
Possible U.S. involvement in the Japanese currency market is “very significant,” added Scicluna.
“If the U.S. authorities really are keen to weaken their currency, then that’s not just against the yen, but against other Asian currencies as well, whilst you have the broader portfolio diversification theme away from the U.S. also likely to play a role,” he said.
Markets watching Trump threats against Canada
Beyond Japan’s benchmark Nikkei, global shares mostly declined on Monday. France’s CAC 40 dipped nearly 0.2 per cent in early trading to 8,127.93, while the German DAX added less than 0.1 per cent to 24,881.34. Britain’s FTSE 100 edged down less than 0.1 per cent to 10,138.76.
U.S. markets opened higher. The S&P 500 rose 0.4 per cent in early trading Monday. The index is coming off its second weekly loss in a row. The Dow Jones Industrial Average added 192 points, and the Nasdaq composite rose 0.3 per cent.
Elsewhere in Asia, South Korea’s Kospi dipped 0.8 per cent to 4,949.59. Hong Kong’s Hang Seng inched up less than 0.1 per cent to 26,765.52, after vacillating earlier in the day, while the Shanghai Composite fell nearly 0.1 per cent to 4,132.60.
Markets were closed in Australia, New Zealand, India and Indonesia.
Markets are closely watching earnings reports that are expected in the weeks ahead from various global companies, some of which might show the negative effects of recent U.S. tariff policies.
U.S. President Donald Trump provided temporary relief to markets last week when he appeared to back down from threats to slap tariffs on European allies unless they let him take over Greenland.
But on Saturday, Trump threatened to impose a 100 per cent tariff on goods from Canada.
Trump had warned he might hike tariffs if Canada signed a free trade deal with China. Prime Minister Mark Carney countered, saying Canada had no plans for such a deal.
In 2024, Canada mirrored the United States by putting a 100 per cent tariff on electric vehicles from Beijing and a 25 per cent tariff on steel and aluminum. China had responded by imposing 100 per cent import taxes on Canadian canola oil and meal and 25 per cent on pork and seafood.
Breaking with the United States this month during a visit to China, Carney cut its 100 per cent tariff on Chinese electric cars in return for lower tariffs on those Canadian products.
In other dealings on Monday, benchmark U.S. crude rose 43 cents to $61.50 US a barrel. Brent crude, the international standard, edged up 48 cents to $65.55 a barrel.
