Gold reaches record US$5,000 per ounce as months-long rally continues amid global turmoil

Gold rose above US$5,000 an ounce for the first time on Monday – while silver rose to $110 an ounce – as geopolitical tensions pushed the US dollar lower.

The value of precious metals has increased in recent months as investors look for relatively safe places to invest.

“As long as fiscal dominance, geopolitical fragmentation and central bank credibility remain in question, precious metals will remain at the center of this perfect storm, not just as a hedge, but as an alternative,” said Daniela Hathorn, senior markets analyst at Capital.com.

In Europe, the US dollar fell to its lowest since mid-November after Japan’s yen rose as much as 1.5 percent. The dollar had gained against the yen in recent months, but fell sharply in the past few days after officials in both Japan and the US signaled they were prepared to intervene to strengthen the yen.

The dollar fell to 153.88 JPY from 155.01 yen; Last week it was trading at around 158 yen. However, a weaker yen is generally favorable for Japanese exporters, as it helps increase the value of their overseas earnings.

Although Japanese finance officials did not directly confirm that such interference was in the works, they did confirm that they were in close coordination with the US on currency fluctuations.

“The intervention talks worked. Since Friday, the yen has shown a sharp rebound on expectations that Japanese authorities – possibly with US coordination – will step in,” said Ipec Ozkardeskaya, a senior analyst at Swissquote.

The yen has been under sustained pressure since Sanae Takaichi became Prime Minister of Japan in October.

Takaichi has made a campaign promise to increase spending and cut taxes ahead of a snap election on Feb. 8, raising concerns that Japan’s already dire fiscal situation may become even less manageable.

That has pushed government bond yields to record highs, just as the Bank of Japan is gradually raising interest rates to tackle inflation. Japan’s Nikkei fell 1.75 percent as the yen strengthened.

Gold hits record high as US dollar sinks

With the dollar falling to its lowest against major currencies in four months and volatility rising, gold attracted a new wave of capital, capping a blistering rally over the past six months to another record high.

Gold was last up 2.1 per cent at US$5,089 an ounce, extending its January gain to more than 17 per cent, while silver rose nearly seven per cent to US$110 an ounce, up more than 50 per cent this month.

“In terms of central bank reserve diversification, gold obviously has a fairly compelling story, which you might have thought was bolstered by the talk and events of this intervention in the US,” said Chris Scicluna, economist at Daiwa Capital Markets.

Potential U.S. involvement in the Japanese currency market is “very significant,” Scicluna said.

“If US officials are indeed willing to weaken their currency, it’s not just against the yen, but also against other Asian currencies, while you also have the broader portfolio diversification theme away from the US likely to play a role,” he said.

The market is keeping an eye on Trump’s threats against Canada

Global stocks mostly fell on Monday, beyond Japan’s benchmark Nikkei. France’s CAC 40 fell about 0.2 percent to 8,127.93 in early trading, while the German DAX rose less than 0.1 percent to 24,881.34. Britain’s FTSE 100 fell less than 0.1 percent to 10,138.76.

American markets opened with gains. The S&P 500 rose 0.4% in early trading Monday. The index is coming off its second consecutive weekly loss. The Dow Jones Industrial Average added 192 points and the Nasdaq Composite rose 0.3 percent.

Elsewhere in Asia, South Korea’s Kospi fell 0.8 percent to 4,949.59. Hong Kong’s Hang Seng rose less than 0.1 percent to 26,765.52, after swings earlier in the day, while the Shanghai Composite fell about 0.1 percent to 4,132.60.

Markets remained closed in Australia, New Zealand, India and Indonesia.

Markets are closely keeping an eye on earnings reports expected in the coming weeks from various global companies, some of which may show negative impacts of recent US tariff policies.

US President Donald Trump provided temporary relief to markets last week when he appeared to back off from threatening to impose tariffs on European allies unless they let him annex Greenland.

But on Saturday, Trump threatened to impose 100 percent tariff on goods coming from Canada.

Trump had warned that he could raise tariffs if Canada signed a free trade agreement with China. Prime Minister Mark Carney hit back, saying Canada has no plans for such a deal.

In 2024, Canada mirrors the United States by imposing a 100 percent tariff on electric vehicles and a 25 percent tariff on steel and aluminum from Beijing. China responded by imposing 100 percent import taxes on Canadian canola oil and meal, and 25 percent on pork and seafood.

Breaking ties with the United States during a visit to China this month, Carney cut its 100 percent tariffs on Chinese electric cars in exchange for lower tariffs on those Canadian products.

In other deals on Monday, benchmark US crude rose 43 cents to US$61.50 a barrel. Brent crude, the international benchmark, rose 48 cents to $65.55 a barrel.