Gold broke by way of $5,000 per ounce for the primary time in historical past. Costs have climbed greater than $650 in January alone. Final week’s 8.5% acquire marked the biggest weekly enhance ever in greenback phrases. It was additionally the most important share rise because the Covid pandemic panic in March 2020. Silver additionally topped $100 per ounce, up 44% this 12 months.
The flight to secure havens comes as markets brace for a triple risk: US-Canada-China tariff escalation, potential yen intervention, and rising odds of a US authorities shutdown.
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Gold Rally Displays Eroding Belief
TD Securities strategist Daniel Ghali advised the Wall Avenue Journal that the gold rally is tied to questions of belief within the international monetary system. Belief has been shaken however not damaged, he famous, including that if it does break, the upward momentum may persist for much longer.
A number of elements are driving gold’s surge. The greenback has weakened amid Trump’s intervention in Venezuela, stress on Fed Chair Jerome Powell, and tariff threats over Greenland. Fed charge cuts have decreased yields on Treasuries and money-market funds, reducing gold’s alternative value.
China has been shopping for gold for 14 consecutive months, and Poland’s central financial institution not too long ago authorised a serious buy. Cyclically adjusted P/E ratios present inventory valuations at their highest because the dot-com bubble in 2000. Buyers are turning to different property.
Three Dangers Markets Are Watching
Past the flight to gold, three particular catalysts are driving investor nervousness this week.
US-Canada-China Tariff Conflict
President Trump threatened to impose 100% tariffs on Canada if it proceeds with a free commerce settlement with China. Canadian Prime Minister Mark Carney instantly pushed again, stating there are not any plans for an FTA with China.
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“Below the free commerce settlement with the US and Mexico, there are commitments to not pursue free commerce agreements with nonmarket economies with out prior notification,” Carney stated. “We’ve no intention of doing that with China or another nonmarket financial system.”
What Canada did was attain a restricted settlement in response to Chinese language retaliatory tariffs. In 2024, Canada mirrored US coverage by imposing 100% tariffs on Chinese language EVs and 25% on metal and aluminum. China responded with 100% tariffs on Canadian canola oil and 25% on pork and seafood. Canada has now lowered its EV tariff to six.1% in alternate, with an annual cap of 49,000 autos—about 3% of Canada’s whole automobile gross sales.
The issue is that Trump referred to as this “one of many worst offers in historical past” and saved up the stress all through the weekend. Treasury Secretary Scott Bessent appeared on ABC, saying, “We will’t let Canada turn out to be a gap that the Chinese language pour their low-cost items into the US.”
Trump additionally mocked Canada on social media, posting, “China is efficiently and fully taking on the as soon as Nice Nation of Canada. So unhappy to see it occur. I solely hope they go away Ice Hockey alone!” Markets are involved a couple of potential coordinated pushback from Canada and China on Monday.
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Yen Intervention Risk
The yen strengthened 0.7% to 154.58 per greenback. Japanese Prime Minister Sanae Takaichi warned of motion in opposition to “irregular strikes,” and stories emerged that the Federal Reserve Financial institution of New York had contacted monetary establishments to inquire about yen alternate charges. Markets interpreted this as a sign that the US may help Japan in foreign money market intervention.
Matt Maley, chief market strategist at Miller Tabak, advised Bloomberg that the majority efforts to assist the yen would solely push long-term charges greater, leaving Japanese policymakers in a troublesome place with no clear answer.
The yen is a major funding foreign money for carry trades. Precise intervention may set off unwinding of yen carry positions, amplifying volatility throughout threat property.
Rising US Shutdown Odds
The funds deal expiring January 31 has turn out to be problematic once more. Kalshi prediction markets present shutdown chance surging to 78.5%. Senate Democratic chief Chuck Schumer introduced that Democrats will oppose the Division of Homeland Safety funding invoice following two deadly shootings of civilians by Immigration and Customs Enforcement brokers in Minnesota.
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Six of the 12 annual spending payments have been signed into regulation, however Republicans want Democratic assist to move the remaining six earlier than Friday’s deadline. Senator Patty Murray, the highest Democrat on the Appropriations Committee who had been pushing colleagues to assist the invoice, reversed course, saying “federal brokers can not homicide folks in broad daylight and face zero penalties.”
Not like October’s 43-day closure, some departments have already secured full-year funding—together with Justice, Commerce, Inside, and Agriculture—so an entire shutdown is unlikely. However different authorities operations can be disrupted, and the Senate will not be scheduled to return till Tuesday because of a snowstorm.
Key Occasions This Week and Implications
The Fed’s FOMC choice is scheduled for January 29. A maintain is predicted, however Trump continues to push for charge cuts. His announcement that he’ll quickly title Powell’s successor provides one other layer of uncertainty. The US funds expires January 31, and Japan holds elections on February 8. Massive tech earnings from Microsoft and Tesla are additionally concentrated this week.
Surging Bitcoin buying and selling quantity over the weekend suggests buyers have already entered panic mode. Three headwinds converged earlier than US markets even opened, and Trump’s tariff threats are rattling markets as soon as once more. If previous patterns maintain, poor market response may result in a TACO (Tariff Announcement Cancelled/Overruled), however volatility appears unavoidable till then.
File highs in gold and silver ship a transparent sign: markets are in search of security.