Gold powers past $5,000, yen surges on intervention fear

By Ankur Banerjee

SINGAPORE, Jan 26 (Reuters) – Gold surged past $5,000 per ounce on Monday as a cocktail of geopolitical ruptures and dollar weakness sent investors scrambling for safety, while markets remained on tenterhooks after a volatile surge in the yen.

The yen rose nearly 1% to 154.23 per dollar as of 0630 GMT, after sharp spikes on Friday sparked speculation over potential intervention. The New York Federal Reserve conducted rate checks on Friday, sources told Reuters, raising the chance of joint U.S.-Japan intervention to halt the currency’s slide.

“The market’s inclination is to short the yen but the possibility of coordination means it no longer is a one-way bet,” said Prashant Newnaha, senior rates strategist at TD Securities in Singapore.

The prospect of a joint U.S.-Japan intervention for the first time in 15 years weighed on the U.S. dollar and broadly lifted other major and emerging currencies. [FRX/] [EMRG/FRX]

The yen has been under relentless pressure since Sanae Takaichi took over as Japan’s prime minister in October due to worries that her fiscal spending plans could exacerbate the country’s already stretched debt burden, which stands at more than double its economic output.

A steep bond market rout in Japan last week had put the spotlight on Takaichi’s plans to cut taxes as she called a snap election that is due for February 8. The bond market has since calmed somewhat, but investors remain jittery.

Japan’s Nikkei dropped 1.75% while S&P 500 futures fell 0.15% and European futures were 0.15% lower as traders awaited the Federal Reserve’s policy meeting later in the week.

U.S. President Donald Trump provided temporary relief to markets last week by reversing tariff threats and downplaying potential forceful action against Greenland. However, further sanctions targeting Iran have reinforced market anxiety.

Increased U.S. pressure against Iran is keeping oil prices aloft and lifting safe-haven gold to record peaks. Precious metals, including silver, have surged in a blistering rally so far this year. The dollar’s weakness on Monday further supported the price surge in these metals.[GOL/]

TD’s Newnaha said it feels like the U.S. Treasury was given a ‘free hand’ in helping the MoF to ultimately drive the administration’s agenda for a weaker dollar. “This should underwrite continued metals outperformance.”

Gold was last up 1.8% at $5,074 per ounce, taking its gains in January to more than 17% while silver gained 4.6% to $107.67 per ounce on Monday, up over 50% this month.

INTERVENTION CHATTER KEEPS YEN ALOFT

Top Japanese authorities said on Monday they have been in close coordination with the United States on foreign exchange, leaving traders on edge at the prospect of an intervention that could come any time.

Carlos Casanova, senior Asia economist at UBP, said the mere expectation of potential intervention could, in itself, contribute to some strengthening of the currency.

“The Japanese yen is likely to stabilise to some extent – though the catalysts for significant appreciation remain limited – while long-term yields are expected to face continued pressure at their current elevated levels.”

The yen was broadly firmer against other currencies too on Monday, inching away from the record low against the euro and Swiss franc and multi-decade lows against sterling. [FRX/]

Charu Chanana, chief investment strategist at Saxo, said the rate-check style warning could help reset positioning and remind the market there’s a line near 159–160.

“With the dollar starting to look softer, this is actually a cleaner window for Japan to lean against yen weakness. Intervention works better when it’s going with the broader USD tide, not fighting it.”

The dollar index, which measures the U.S. currency against six rivals, fell as much as 0.2% to a four-month low of 96.996 after dropping 0.8% on Friday in its biggest one-day drop since August.

Investor focus this week will also be on the Fed. The central bank is expected to hold rates steady at a meeting overshadowed by a Trump administration criminal investigation of Fed Chair Jerome Powell, whose term ends in May.

In commodities, oil prices were little changed after rising about 3% on Friday, with traders weighing the impact of Trump pressuring Iran through more sanctions on vessels that transport its oil.

Brent crude futures were flat at $65.91 a barrel, while U.S. West Texas Intermediate crude stood at $61.10 per barrel.

(Reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong)