Fund rotation drives the US dollar to weaken, Asian stock markets hit record highs, silver approaches 100, and gold goes straight to 5,000

# Source: Wall Street Insights

## By Zhang Yaqi & Bao Yilong

Asian stock markets climbed to record highs on Friday, with the MSCI Asia Pacific Index rising 0.4% and the MSCI Emerging Markets Index also hitting an all-time peak. Japanese equities advanced as the Bank of Japan kept its policy rate unchanged at 0.75% as expected. The USD/JPY pair tumbled nearly 70 pips intraday, breaking below the 158 level and last trading at 157.70. Spot gold surged to a record high above $4,965 per ounce, while silver prices neared $100 per ounce.

Against the backdrop of U.S. policy uncertainty and geopolitical risks, global investors are accelerating the shift of capital allocation toward non-U.S. assets, driving emerging market equities and precious metals to fresh record highs simultaneously.

On Friday, Asian stock markets scaled record highs, with the MSCI Asia Pacific Index edging up 0.4% and the MSCI Emerging Markets Index also touching an all-time high. U.S. stock index futures pointed to a modest rise for benchmark U.S. indices, but the gains were far smaller than those in Asian markets. Japanese stocks moved higher as the Bank of Japan maintained its policy rate at 0.75% in line with market expectations. The USD/JPY pair slid around 70 pips intraday, falling below 158 to trade at 157.70.

The U.S. dollar extended its decline after posting its biggest single-day drop in a month. The weaker greenback lifted precious metals, with spot gold surging to a record high above $4,965 per ounce and silver prices approaching $100 per ounce.

Market trends indicate that investors are gradually reducing their U.S. dollar exposure and turning to Asian stock markets, which boast more attractive valuations and stronger growth prospects. This shift comes amid escalating U.S. policy uncertainty, including challenges to the Federal Reserve's independence and tariff concerns triggered by strained U.S.-Europe relations.

- The Japan's Topix Index rose 0.4%.

- The Nikkei 225 Index climbed 0.34%.

- Australia's S&P/ASX 200 Index gained as much as 0.45% intraday.

- The USD/JPY pair fell nearly 70 pips intraday, breaking below 158 to 157.70.

- The U.S. 10-year Treasury yield was little changed at 4.24%.

- Japan's 2-year government bond yield rose 3 basis points to 1.245%, and the 5-year yield gained 2 basis points to 1.68%. The 40-year yield dropped 5.5 basis points to 3.94%, after hitting a record high earlier this week.

- West Texas Intermediate (WTI) crude oil advanced 0.9% to $59.89 per barrel.

- Spot gold rallied to a record high above $4,965 per ounce, with silver prices nearing $100 per ounce.

## Capital Accelerates Inflows into Emerging Markets

The semiconductor industry chain continued its bullish momentum from the previous day, with leading stocks such as Japanese semiconductor equipment manufacturers and South Korea's Samsung Electronics logging strong gains. The MSCI Asia Pacific Index rose 0.5%, with advancers outnumbering decliners by more than two to one.

(Samsung Electronics climbed 1.7%)

Analysts believe that the temporary easing of U.S.-Europe trade war fears has significantly boosted global investors' risk appetite and accelerated a potential, deeper-seated asset rotation.

Worries over the unpredictability of U.S. policies have prompted capital to gradually flow out of overvalued U.S. assets and into Asian markets, which offer more attractive valuations and are relatively insulated from geopolitical risks. This rotation has directly weighed on the U.S. dollar and provided strong upward momentum for assets such as Asia-Pacific equities and precious metals.

Mabrouk Chetouane, Head of Global Market Strategy at Natixis IM Solutions, said:

> Asia's distance from geopolitical hotspots such as the U.S., EU and Latin America acts as a buffer, allowing investors to diversify their exposure to risk assets.

Notably, the focus of Asian markets will be on the Bank of Japan's interest rate decision, with the central bank expected to keep its policy rate unchanged at 0.75%. Earlier, Prime Minister Sanae Takaichi's proposed expansionary spending plan triggered financial market volatility, so the Bank of Japan's policy remarks will be closely watched.

The USD/JPY pair dropped nearly 70 pips intraday, breaking below 158 to 157.70.

Peter Grant, Senior Metals Strategist at Zaner Metals, commented:

> In the current macro environment, gold demand is underpinned by the U.S. dollar depreciation trend. Short-term pullbacks are likely to be seen as buying opportunities, with gold expected to break above $5,000 per ounce and potentially climb even higher.

Spot gold prices moved higher on the momentum, breaking above $4,960 per ounce intraday to hit a new all-time high. Silver also touched a record peak, briefly approaching the $99 level.

(Spot silver surged 2.5% in morning trading, while spot gold rose 0.75%)

Spot platinum rallied nearly 2% intraday before pulling back to levels near Thursday's close.

(Spot platinum erased intraday gains after a sharp rise)

## Bright Outlook for Precious Metals Market

Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, stated that geopolitical tensions, broad-based U.S. dollar weakness and expectations of Federal Reserve rate cuts this year are all components of the macro de-dollarization trend, which continue to influence gold demand.

Markets expect the Federal Reserve to implement two 25-basis-point rate cuts in the second half of this year, which has enhanced the appeal of non-interest-bearing gold.

Meanwhile, spot silver and platinum have seen even stronger gains. Nikos Tzabouras, Senior Market Analyst at Tradu, said that silver's fundamental narrative is far more attractive than that of gold.

He pointed out that while silver may not be a reserve asset like gold, it still benefits from safe-haven capital inflows and U.S. dollar weakness.

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