Gold hits $5,000 for the first time – three risks behind the panic

Gold surpassed $5,000 per ounce for the first time in history. Prices increased by more than $650 in January alone. Last week’s increase of 8.5% was the largest weekly increase ever in dollar terms. This was also the largest percentage increase since the Covid panic in March 2020. The price of silver has also exceeded $ 100 per ounce, a 44% this year.

The flight to safe havens comes as markets brace for a triple threat: escalating tariffs between the United States, Canada and China, the possibility of yen intervention, and a growing likelihood of a US government shutdown.

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The rise in gold reflects the erosion of confidence

He said TD Securities strategist Daniel Ghaly told the Wall Street Journal that the rise in gold is linked to questions of confidence in the global financial system. Confidence has been shaken but not broken, he noted, adding that if broken, the upward momentum could continue for much longer.

There are many factors driving the rise of gold. Dollar weakness on average Trump’s intervention in Venezuelapressure on the chairman of the Federal Reserve Jerome Powell, and threats of tariffs on Greenland. Lowering interest rates by the Federal Reserve has reduced yields on Treasuries and money market funds, reducing the opportunity cost of gold.

China has bought gold for 14 consecutive months, and recently the Polish Central Bank approved a major purchase. The cyclically adjusted price-to-earnings ratio shows stock valuations at their highest levels since the dot-com bubble in 2000. Investors are turning to alternative assets.

Three risks that markets follow

Aside from the flight in gold, there are three specific catalysts that are worrying investors this week.

Fees vary between the United States, Canada and China

President Trump has threatened to impose 100% tariffs on Canada if it goes ahead with a free trade agreement with China. Canadian Prime Minister Mark Carney refused Immediatelysaying there are no plans for a free trade agreement with China.

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“Under the free trade agreement with the United States and Mexico, there are obligations not to pursue free trade agreements with non-market economies without prior notice,” Carney said. “We have no intention of doing this with China or any other non-market economy.”

What Canada did do was reach a limited deal in response to China’s retaliatory tariffs. In 2024, Canada tried to implement the US policy of imposing 100% tariffs on Chinese electric vehicles and 25% on steel and aluminum. China responded by imposing 100% tariffs on Canadian canola oil and 25% on pork and seafood. Canada has now reduced its electric vehicle rate to 6.1% correspondingly, with an annual limit of 49,000 vehicles – about 3% of Canada’s total vehicle sales.

The problem is that Trump called this deal “one of the worst deals in history” and continued to press it throughout the weekend. The Chancellor of the Exchequer appeared Scott Besant On the ABC, he said: “We cannot allow Canada to become an opportunity for the Chinese to inject their cheap goods into the United States.”

Trump also mocked Canada on social media, posting: “China is successful and will completely take over the great old nation of Canada. Very sad to see that happen. I just hope they leave ice hockey alone!” Markets are concerned about the possibility of a coordinated response from Canada and China on Monday.

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Threat of yen intervention

The yen rose 0.7% to 154.58 per dollar. Japanese Prime Minister Sanae Takaichi warned of measures against “abnormal movements,” and reports emerged that the New York Federal Reserve had reached out to financial institutions to demand yen exchange rates. Markets interpreted this as a signal that the US might help Japan Intervention in the currency market.

Matt Maley, chief market strategist at Miller Tabak, told Bloomberg that most efforts to support the yen will only push prices higher in the long run, leaving Japanese policymakers in a difficult position without a clear solution.

The yen is a major financing currency for transportation. The current intervention could result in the cancellation of yen positions, increasing volatility among risk assets.

High probability of blocking in the United States

The budget agreement that expires on January 31 is again an issue. Predictive markets appear Possibility of closure It drops to 78.5%. Senate Democratic Leader Chuck Schumer announced that Democrats oppose a funding bill for the Department of Homeland Security following two fatal shootings of civilians by Immigration and Customs Enforcement agents in Minnesota.

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Six of the 12 annual spending bills have been signed into law, but Republicans need Democratic support to pass the remaining six before Friday’s deadline. Senator Patty Murray, the top Democrat on the Appropriations Committee who had pushed her colleagues to support the bill, changed her position, saying: “Federal agents cannot kill people in broad daylight and face no consequences.”

Unlike October’s 43-day shutdown, some ministries have already received full funding for the year — including the Departments of Justice, Commerce, Interior and Agriculture — so a full shutdown is unlikely. But other government operations will be disrupted, and the Senate is not expected to return until Tuesday because of a snowstorm.

Key events this week and implications

The Federal Reserve’s decision on the Federal Open Market Committee is scheduled for January 29. A pause is expected, but Trump continues to push for lower interest rates. His announcement that he will soon name a successor to Powell adds another layer of uncertainty. The US budget expires on January 31st, and Japan holds elections on February 8th. The profits of major technology companies were also focused on Microsoft and Tesla this week.

The increase in Bitcoin trading volume over the weekend indicates that investors have already entered panic mode. Three headwinds gathered before US markets opened, and Trump’s tariff threats shook the markets once again. If previous patterns continue, a poor market reaction could lead to TACO’s announcement being canceled or cancelled, but so far volatility seems inevitable.

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