Gold surged past $5,000 per ounce and silver reached $110 per ounce on Monday due to various geopolitical tensions impacting the U.S. dollar. The demand for precious metals has been on the rise as investors seek secure investment options.
Daniela Hathorn, a senior market analyst at Capital.com, highlighted that as long as uncertainties around fiscal dominance, geopolitical fragmentation, and central bank credibility persist, precious metals are likely to remain attractive not only as hedges but also as alternative investments.
The U.S. dollar weakened to its lowest level since mid-November following a 1.5% increase in the Japanese yen in Europe. Despite recent gains against the yen, the dollar experienced a sharp decline after Japan and the U.S. hinted at potential intervention to bolster the yen.
Although Japanese officials did not confirm intervention plans, they acknowledged close coordination with the U.S. on currency fluctuations. Analysts like Ipek Ozkardeskaya from Swissquote noted that intervention discussions led to a significant rebound in the yen.
The yen has faced continuous pressure since Sanae Takaichi became Japan’s prime minister in October, with concerns arising over increased spending and tax cuts ahead of the upcoming election. This has pushed government bond yields to record highs, impacting the Nikkei stock index.
Amid the weakening U.S. dollar, gold reached a new high, with prices hitting $5,089 per ounce, while silver also saw significant gains. The dollar’s decline against major currencies and rising volatility attracted more investments into gold, leading to a remarkable rally.
Chris Scicluna, an economist at Daiwa Capital Markets, emphasized the compelling narrative surrounding gold, particularly in terms of central bank reserve diversification. He suggested that potential U.S. involvement in the Japanese currency market could have significant implications for various currencies in Asia and broader portfolio diversification trends.
Global markets witnessed mixed performance, with shares mostly declining on Monday. While U.S. markets opened higher, European indices fluctuated. Investors are closely monitoring upcoming earnings reports, especially those reflecting the impact of recent U.S. tariff policies.
President Donald Trump’s recent threats against Canada regarding tariffs have added to market uncertainties. Despite temporary relief last week, new threats of imposing a 100% tariff on Canadian goods have reignited concerns. The ongoing trade tensions are closely monitored for their potential impact on global trade dynamics.
Benchmark crude prices experienced modest gains on Monday, with U.S. crude rising to $61.50 per barrel and Brent crude reaching $65.55 per barrel. The energy market remains sensitive to geopolitical developments and trade disputes, influencing price movements.