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Gold rallies as Japan fiscal crisis and Fed policy doubts fuel safe haven buying
The global financial markets witnessed a surge in gold prices, as the metal climbed 0.6% to approximately $4,092 per ounce during Wednesday’s Asian trading session. The rally is attributed to the confluence of Japan’s deepening fiscal crisis and heightened uncertainty surrounding Federal Reserve (Fed) policy.
In recent days, Japan has been beset by a full-blown fiscal crisis, characterized by intensifying bond market instability. This tumultuous scenario has led to an unprecedented spike in safe haven demand for gold. The asset has now recorded a whopping 55% gain year-to-date, setting it up for its strongest annual performance since the 1979 bear market.
As Japan’s government grapples with fiscal sustainability concerns, the nation’s bond markets have been thrown into chaos. Japanese 20 and 30-year government bond yields skyrocketed to multi-decade highs, fueled by fears surrounding the country’s unprecedented spending plans. The proposed 25 trillion yen ($163 billion) stimulus package has exacerbated market jitters.
Meanwhile, Fed policymakers’ recent comments have effectively shifted expectations for a December rate cut, leading to increased uncertainty and further boosting gold demand. Market participants now ascribe just a 42.4% probability to a 25-basis-point interest rate reduction, a significant decline from the 62.4% chance priced in only one week ago.
Gold’s price appreciation has been bolstered by a surge in safe haven buying amidst rising concerns about global fiscal stability and heightened uncertainty surrounding monetary policy. As investors seek shelter from market volatility, gold prices have surged to $4,092 per ounce.
The sharp rise in gold prices is not an isolated phenomenon. Other precious metals also recorded significant gains, with silver jumping 1.3% to $51.38 per ounce and platinum surging 0.9% to $1,547.96 per ounce.
Despite the economic uncertainty, commodities strategist Ole Hansen at Saxo Bank noted that leveraged traders have been absorbed by long-term buyers. Central banks and institutional investors continue purchasing during price dips, which could provide a solid foundation for further price appreciation in 2026.
Source: blockonomi.com
