Gold falls below $4,000, yen rises to resistance level as market becomes picky about "safe-haven assets"

Title context: Gold falls below $4,000, yen rises to resistance level as market becomes picky about "safe-haven assets" Text: Global market risk aversion ran high this week, but traditional safe-haven assets diverged sharply: US Treasuries were in demand, the yen rose to a key technical level, while gold unexpectedly fell. Gold fell below $4,000 per troy ounce on Friday, touching a more than three-month low of $3,986.50, with a cumulative decline of 4% for the week. Berenberg analysts pointed out that gold's decline "against a risk-off backdrop" is a "noteworthy divergence." Meanwhile, French fiscal concerns pushed the yen to a one-year high against the euro, while the dollar fell below the key support level of 157.50 against the yen to around 156.9. Goldman Sachs Group, Inc.(GS.US) FICC listed the yen as its preferred hedge in the current environment. The US 10-year Treasury yield fell back below 5% on Thursday for the first time in a month, making it the most favored safe-haven destination this week. The concentrated release of risk sentiment this week stemmed from a combination of pressures: France's budget deficit triggered European sovereign debt concerns, questions suddenly intensified over whether AI capital expenditure can continue to obtain financing support, and tensions in the Middle East GEO Group Inc situation persisted. Gold loses its safe-haven halo, diverging from historical patterns Gold's performance this week clearly ran counter to its traditional safe-haven attributes. Normally, falling US Treasury yields are a positive for gold, which offers no yield, but investors continued to sell gold this week while flooding into US Treasuries. Berenberg analysts said the last time gold performed so weakly while Treasury yields fell sharply was December 2008, the deepest phase of the global financial crisis. The analysts believe gold's current weakness is closely related to its role as a speculative asset over the past year. That speculative frenzy once pushed gold to an all-time high of more than $5,400 in January this year, but as the relevant traders gradually exited, gold prices have since fallen by more than one-fifth. Erik Norland, Chief Economist at CME Group Inc. Class A(CME.US), said the biggest driver of this year's decline in precious metals prices is the market's shift in expectations from rate cuts to rate hikes. But he also noted that, given the erosion of bond market confidence by fiscal deficits, rising inflation, GEO Group Inc political risk and continued central bank gold purchases, gold prices remain far above early 2025, which is "surprising." World Gold Council data showed that central bank gold purchases rose in September to the highest monthly level since November 2024. John Reade, senior market strategist at the World Gold Council, said at the institution's precious metals summit that high interest rates have reduced gold's investment appeal, while high energy prices have weakened consumers' ability to buy gold. John Reade said: This year, in the absence of safe-haven buying, fundamental factors carry more weight. At the World Gold Council summit, several fund managers remained cautiously optimistic about gold's outlook, expecting prices to rebound, but current technical and capital flow pressures make that expectation face greater uncertainty. Berenberg analysts warned that gold's close below the $4,000 mark on Friday "may trigger further outflows from gold ETFs and technical selling across the entire gold equities sector." Gold ETF demand already fell in the first half of this year and rebounded in the third quarter as sales warmed in September, but the current price trend poses new pressure on related fund flows. Yen becomes the most sought-after safe-haven asset this week While gold lost its footing, the yen became the biggest beneficiary of safe-haven trades this week. Amid mounting French debt concerns, the yen rose to a one-year high of 175.20 against the euro, while the dollar fell to a five-week low of 156.08 against the yen. As mentioned by Wallstreetcn, Goldman Sachs Group, Inc.(GS.US) FICC analyst Chryssafis listed the yen as the preferred hedge in the current AI bubble burst scenario, and the dollar has broken below the 157.50 multiple-bottom support and the 50-day moving average against the yen. Goldman Sachs Group, Inc.(GS.US) believes that reduced attractiveness of US dollar assets and capital repatriation to Japan will in turn drive yen appreciation. Goldman Sachs Group, Inc.(GS.US)'s long-term fair value model shows that the yen is undervalued by about 40% against the dollar, making it the most undervalued among the currencies it tracks. Japanese government data showed that consumer prices excluding fresh food rose 2.1% year-on-year in September, accelerating from 1.7% in August, but inflation remains moderate compared with the United States and Europe, which also enhances the yen's appeal relative to other major currencies. Kyugo Hasegawa, market economist at Mizuho Bank (MFG.US), noted in a research report that France's fiscal problems boosted the Swiss franc and simultaneously raised market vigilance that the Swiss National Bank may step in to limit franc appreciation, which may channel some safe-haven funds to the yen. But he also stressed that whether the yen can rise further ultimately still depends on the direction of Japan's domestic fiscal and monetary policy. This article is reprinted from "Wallstreetcn", author: Bao Yilong, GMTEight editor: Feng Qiuyi