Political Turmoil in France and Japan Drives Global Gold Price Surge
Global gold prices rose sharply in the Asian session on Monday, driven by political turmoil in two major global economies: France and Japan. The resignation of French Prime Minister Sébastien Lecornu and the ascension of Japan's new Prime Minister, Sanae Takaichi, created political and economic uncertainty, increasing investor interest in safe-haven assets like gold.
In Europe, Lecornu's resignation raised concerns about the direction of fiscal policy and government stability in France, a key pillar of the eurozone economy. This uncertainty prompted market participants to avoid risky assets and increased capital flows to safe-haven assets. Meanwhile, Sanae Takaichi's inauguration in Japan was seen as a signal of continued loose monetary policy by the Bank of Japan, including the possibility of maintaining negative interest rates for longer. These expectations put downward pressure on the yen and fueled demand for gold as a hedge against potential currency weakness.
Simultaneously, the political situation in Europe and new policy directions in Asia created cross-current pressures in global markets. Investors see rising geopolitical tensions and volatility in major currencies as compelling reasons to strengthen portfolios in non-yielding instruments like precious metals. This has kept gold prices gaining momentum even as the US dollar remains strong.
The impact on the foreign exchange market has been significant. The euro weakened due to political concerns in France, which could shake confidence in the stability of the eurozone. Meanwhile, the Japanese yen also declined due to the ultra-loose economic policies expected from the Takaichi administration. The combined weakening of the euro and yen against the US dollar weakened the attractiveness of both currencies and strengthened gold's position as a stable hedge against changing political and global policy directions.
Source: Newsmaker.id
