The Yen, Gold, and Stock Markets Are All Rising

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The Japanese yen has been on a remarkable rally in the past few months, having sunk to record lows in 2020. After hitting its lowest-ever levels against the U.S. dollar last year, the currency has surged higher, sparking renewed optimism among investors.

With the Bank of Japan raising the ceiling on long-term yields just as the Fed approaches the end of its tightening cycle, monetary policy convergence has emerged as the new market theme.

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This newfound strength of the yen has been seen across many global markets, from stocks to gold and other commodities. Investors have started to flock to safe havens like gold as a hedge against uncertainty and volatility brought about by central bank policies. This dynamic has recently sent gold prices near all-time highs, helping global stock markets to power higher.

Gold has been on an absolute tear this year, gaining nearly 3% last week to settle at its highest levels since April, around the $1,920 mark. Gold has benefited from a perfect storm of factors that have made it attractive to investors: central banks’ loose monetary policies, increasing geopolitical tensions, and the weakening U.S. dollar.

Investors have also been pouring into gold-backed exchange-traded funds and physical bullion like coins and bars due to their added security. This has helped drive demand higher and pushed gold prices even further up as global economies struggle in the face of the ongoing pandemic crisis.

According to Investing.com, “The main downside risk might be a resolution to the conflict in Ukraine that diminishes safe-haven flows, although that doesn’t seem imminent while Kyiv continues to receive financial aid and advanced weapons.”

As the year begins, the markets have been engulfed in the sense of euphoria reminiscent of 2021, with crypto assets, meme stocks, and currencies linked to global risk appetite taking off. This surge has also been seen in many traditional asset classes, from commodities to stocks and bonds worldwide.

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