Gold Hits $5,000 for First Time — Three Risks Behind the Panic

Source: CryptoNewsNet Original Title: Gold Hits $5,000 for First Time — Three Risks Behind the Panic Original Link: https://cryptonews.net/news/finance/32333882/ Gold broke through $5,000 per ounce for the first time in history. Prices have climbed more than $650 in January alone. Last week’s 8.5% gain marked the largest weekly increase ever in dollar terms. It was also the biggest percentage rise since the Covid pandemic panic in March 2020. Silver also topped $100 per ounce, up 44% this year.

The flight to safe havens comes as markets brace for a triple threat: US-Canada-China tariff escalation, potential yen intervention, and rising odds of a US government shutdown.

Gold Rally Reflects Eroding Trust

A leading strategist noted that the gold rally is tied to questions of trust in the global financial system. Trust has been shaken but not broken, with warnings that if it does break, the upward momentum could persist much longer.

Multiple factors are driving gold’s surge. The dollar has weakened amid geopolitical tensions, pressure on central bank leadership, and tariff threats. Rate cuts have reduced yields on Treasuries and money-market funds, lowering gold’s opportunity cost.

Central banks have been actively buying gold for extended periods, and major economies’ central banks have recently approved significant purchases. Cyclically adjusted P/E ratios show stock valuations at their highest since the dot-com bubble in 2000. Investors are turning to alternative assets.

Three Risks Markets Are Watching

Beyond the flight to gold, three specific catalysts are driving investor anxiety this week.

Tariff Escalation Concerns

Tariff threats have escalated significantly, with major trading partners engaged in tense negotiations. Trade tensions between major economies have intensified, with retaliatory measures and counter-proposals creating uncertainty. Recent agreements involve compromises on automotive tariffs and agricultural products, but continued pressure from policymakers suggests further volatility ahead.

Markets are concerned about a potential coordinated response from multiple countries on Monday, which could amplify market disruptions.

Yen Intervention Threat

The yen strengthened 0.7% to 154.58 per dollar. Central bank officials warned of action against “abnormal moves,” and reports emerged that major financial regulators had contacted institutions to inquire about yen exchange rates. Markets interpreted this as a signal that coordinated currency intervention might occur.

Analysts noted that most efforts to support the yen would push long-term rates higher, leaving policymakers in a difficult position with no clear solution.

The yen is a primary funding currency for carry trades. Actual intervention could trigger unwinding of yen carry positions, amplifying volatility across risk assets including cryptocurrencies.

Rising Government Shutdown Odds

The budget deal expiring January 31 has become problematic. Prediction markets show shutdown probability surging to 78.5%. Opposition to key spending bills has emerged due to recent controversial incidents, creating legislative gridlock.

Six of the 12 annual spending bills have been signed into law, but support is needed to pass the remaining six before Friday’s deadline. Some departments have already secured full-year funding, so a complete shutdown is unlikely. But other government operations would be disrupted, and legislative schedules have been impacted by weather.

Key Events This Week and Implications

The Federal Reserve’s policy decision is scheduled for January 29. A hold is expected, but pressure for rate cuts continues. Central bank leadership uncertainty adds another layer of uncertainty. The US budget expires January 31, and other major elections are scheduled for February 8. Big tech earnings from major companies are also concentrated this week.

Surging Bitcoin trading volume over the weekend suggests investors have already entered panic mode. Three headwinds converged before US markets even opened, and tariff threats are rattling markets once again. If past patterns hold, poor market reaction could lead to policy reversal, but volatility seems unavoidable until then.

Record highs in gold and silver send a clear signal: markets are seeking safety.