Retail gold prices in Japan exceed 10,000 yen per gram for the first time

On Tuesday, the retail cost of gold in Japan crossed the 10,000 yen ($68.31) per gram mark for the first time, reaching 10,001 yen per gram on that day, marking a 28 yen surge from the previous day’s price. The value of gold in yen has been climbing due to the yen’s decline against the dollar. This rise is linked to a rising desire for gold as a secure investment, prompted by worries about a sluggish global economy.

Yen’s depreciation is pushing up domestic gold prices

The yen’s weakening trend against the dollar has continued, reaching mid-146 level. This movement was influenced by Jerome Powell, the Chair of the U.S. Federal Reserve, who recently stated that the central bank would uphold its strict control over credit. That prompted investors to favor the dollar over the yen, foreseeing a growing difference in interest rates between Japan and the United States.

Even as international gold prices, measured in dollars, stay elevated, the swift devaluation of the Japanese yen is propelling domestic gold prices higher within Japan.

Tuesday witnessed strong buyer interest in gold for the second consecutive day, nearly touching a two-week peak achieved on the prior day. During the Asian trading session, the XAU/USD rate remained above $1,920, aided by a slight dip in the U.S. Dollar (USD) value. The U.S. Dollar Index (DXY), which gauges the USD’s performance against various currencies, retraces from its peak on June 1 that was reached last Friday.

This decline supports gold, primarily influenced by decreased yields on U.S. Treasury bonds. Yet, the Federal Reserve raising interest rates in the future could counterbalance substantial drops in the U.S. Dollar (USD). Recently, Powell also addressed persistent high inflation, reaffirming the Fed’s intention to implement rate hikes as a response.

Moreover, the strength of the U.S. economy might require maintaining elevated interest rates. The rise in the critical 10-year U.S. bond yield last week, driven by these expectations, could persist in strengthening the USD. Notably, China’s recent efforts to attract investors to its struggling stock markets might moderate the attractiveness of gold as a safe-haven asset, prompting cautious investor behavior.

Nonetheless, the gold market remains somewhat shielded due to concerns about a potentially significant global economic downturn centered around China, which bolsters gold’s appeal as a safe-haven asset. The market will shift to the upcoming release of China’s August PMI figures. Additionally, significant economic data releases from the U.S., including the pivotal Non-Farm Payrolls (NFP) report, will steer investors and mold the direction for the metal’s future price movements.