Eyes on Fed meeting
Lloyd Chan, at MUFG, added: “The balance of risks may point toward dollar vulnerability and heightened two-way volatility in USD/JPY as markets navigate intervention uncertainty and evolving policy expectations around BoJ policy stance and Japan Prime Minister Takaichi’s fiscal policy.”
The weakening dollar helped send gold to a peak of $5,110.12 per ounce. Silver broke $100 Friday and spiked above $109 Monday.
The precious metals have been hitting multiple records of late owing to a rush into safe havens by traders spooked by rising geopolitical concerns, including Donald Trump’s intervention in Venezuela and a recent warning to Iran.
Strong central bank demand and elevated inflation have added to the mix, along with fresh worries of another US government shutdown.
“Over the past few days, gold’s price action has been textbook safe-haven behaviour,” said Fawad Razaqzada, market analyst at Forex.com.
“Underlying demand for protection is still there. Confidence in the dollar and bonds look a bit shaky.”
The latest developments come ahead of the Fed’s next policy meeting this week, which is expected to see officials stand pat on rates, having cut in the past three.
“We don’t expect to learn a lot at the January FOMC meeting. The Fed is on hold but remains data dependent. The balance of risks around the two mandates hasn’t changed much since December,” wrote Bank of America economists, referring to the bank’s goal of keeping a cap on inflation and supporting the jobs market.
“Chair Powell’s press conference might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise.”
Trump has made no secret of his disdain for Powell, claiming there is “no inflation” and repeatedly questioning the Fed chair’s competence and integrity.
Equity markets struggled after a soft lead from Wall Street on Friday.
Tokyo sank 1.8 percent owing to the stronger yen, which weighs on Japanese exporters, while Hong Kong, Shanghai, Singapore, Seoul and Manila and Bangkok also retreated.
Taipei and Wellington rose.
Oil prices extended Friday gains of almost three percent that came after Trump said a US “armada” was heading towards the Gulf and that Washington was watching Iran closely.
The president has repeatedly left open the option of new military action against Tehran after Washington backed and joined Israel’s 12-day war in June aimed at degrading Iranian nuclear and ballistic missile programmes.
Key figures at around 0700 GMT
Dollar/yen: DOWN at 154.17 yen from 157.00 yen on Friday
Euro/dollar: UP at $1.1859 from $1.1823
Pound/dollar: UP at $1.3664 from $1.3636
Euro/pound: UP at 86.78 pence from 86.70 pence
Tokyo – Nikkei 225: DOWN 1.8 percent at 52,885.25 (close)
Hong Kong – Hang Seng Index: DOWN 0.2 percent at 26,706.02
Shanghai – Composite: DOWN 0.1 percent at 4,132.61 (close)
West Texas Intermediate: UP 0.4 percent at $61.34 per barrel
Brent North Sea Crude: UP 0.5 percent at $66.18 per barrel
New York – Dow: DOWN 0.6 percent at 49,098.71 (close)
London – FTSE 100: DOWN 0.1 percent at 10,143.44 (close)
