[Gold and Stocks Both Rising!] Yet Economic Anxiety Persists? The Surprising Relationship Between the 158 Yen Weak Yen and 5% US Interest Rates
Thank you as always!
We’ve entered the middle of October, and the morning and evening chill is making it feel like autumn.
Now, on October 9th, there was a somewhat strange movement in the financial markets.
Gold prices rose by about 1.5%. Furthermore, US stock prices also rose.
If you think about it normally, both seem like good news, right?
However, US long-term interest rates are at a high level in the 5% range, and anxiety remains regarding crude oil prices and inflation.
“If both gold and stocks are rising, isn’t the economy doing well?”
Today, starting from that question, I will explain the relationship between gold, stocks, the weak yen, interest rates, and crude oil, incorporating the perspective of an active appraiser.
[Menma’s Perspective🔎]
Do you think “stocks rising = a good economy”?
Actually, stock prices reflect not only the current economy but also future corporate profits and investor expectations.
On the other hand, gold is sometimes bought due to caution against inflation or anxiety about currencies.
In other words, even if gold and stocks rise at the same time, the reason is not necessarily the same.
What is important is to think about what is behind the numbers.
[Checkpoints to Understand in 1 Minute]
☑️ ① [Gold Price] Reason for the temporary rebound to the $4,194 level, up about 1.5%
☑️ ② [US Interest Rates] What the 10-year Treasury yield of about 5.24% means
☑️ ③ [Weak Yen] The impact of the 158 yen level on Japanese gold prices
☑️ ④ [US Stocks] Why stock price increases and economic anxiety occur simultaneously
☑️ ⑤ [Crude Oil/Household Budget] The connection between energy prices and daily life
Please scroll down for the rest👇
① [Gold Price] Why did it surge again?
On October 9th, the international gold price rose to a high of $4,194.36 per troy ounce, marking a rebound of about 1.5% at the time of reporting.
Gold prices had been falling against the backdrop of a strong dollar and rising US Treasury yields, but this time, there was buying back by investors who wanted to buy at low prices.
What you want to know here is the relationship between gold and interest rates.
Gold itself does not have interest like bank deposits or bonds.
Therefore, when interest rates rise, the relative attractiveness of holding gold tends to weaken.
However, when interest rate hikes are already expected in the market, or after prices have fallen significantly, buying back can occur.
This rise shows that there are cases where gold can rise even when interest rates are high.
Menma POINT🔎
Just because gold has risen does not mean it will continue to rise in the future. It is important to distinguish whether the reason for the rise is “new buying material” or “buying back after a decline.”
② [US Interest Rates] The meaning of the 5.24% figure
The US 10-year Treasury yield on October 9th was about 5.24%.
The 10-year Treasury yield is a benchmark for the yield the market demands for 10-year government bonds issued by the US government.
The fact that this number is high means that there is likely to be upward pressure on long-term borrowing rates for companies and households.
For example, when a company builds a factory or a data center.
If borrowing rates are high, the funds needed for investment will also be expensive.
If the burden of mortgage payments becomes heavy, it may also affect household consumption.
Furthermore, in a state of high interest rates, it can be a headwind for gold, which does not generate interest.
However, when considering gold prices, not only nominal interest rates but also “real interest rates,” which take inflation rates into account, are important.
It is not a simple relationship where gold necessarily falls because interest rates are high.
③ [Weak Yen] How does the 158 yen level affect gold prices?
In the New York market on October 9th, the dollar-yen pair moved in the 158 yen range.
This exchange rate is extremely important when considering Japanese gold prices.
International gold prices are basically denominated in US dollars.
In other words, when purchasing in Japanese yen, it is affected by the dollar-yen rate.
If the international gold price were $4,194,
at 150 yen to the dollar, it would be about 629,000 yen.
At 158 yen to the dollar, it would be about 663,000 yen.
Even for the same ounce, a difference of about 34,000 yen is created just by the exchange rate.
Therefore, even if global gold prices are flat, if the yen weakens, domestic gold prices tend to rise.
In fact, the over-the-counter purchase price for gold announced by Tanaka Kikinzoku at 9:30 AM on October 9th was 22,954 yen per gram.
This was an increase of 206 yen from the previous business day.
Furthermore, at the price announced at 5:00 PM on the same day, the over-the-counter purchase price was 23,192 yen.
Even on the same day, the price differs depending on the time you check.
What I want to convey as an active appraiser
I sometimes hear from customers, “Gold went up on the news, so I can sell it for more than yesterday, right?”
The market price is certainly important.
However, in actual appraisal, purity, weight, fees, and the price settings of each purchase store are also involved.
The gold content is also different between K24 and K18.
The gold price on the news and the actual purchase amount you can receive are different.
Before selling, I recommend checking the final purchase amount for the day.
④ [US Stocks] Why is there economic anxiety even though stocks are rising?
In the US market on October 9th, major stock indices rose.
The S&P 500 closed at 7,811.54.
This is an increase of about 0.6% from the previous day.
On the other hand, Japan’s Nikkei Stock Average was 69,030.92 yen, a slight decline of 11.19 yen from the previous day.
So, if US stock prices are rising, has the anxiety about the economy disappeared?
Not necessarily.
In the stock market, expectations for AI-related companies and forecasts of corporate performance can push up stock prices.
On the other hand, in actual household budgets, rising prices and high borrowing rates can be a burden.
In other words,
expectations for the future of companies are high.
But the burden on households is heavy.
These two can happen at the same time.
Also, in stock indices like the S&P 500, the price movements of large companies have a major impact on the whole.
Even if the index is rising, it does not mean that all companies and households are doing well in the same way.
When looking at stock prices, I want to pay attention not only to the index but also to which sectors are rising.
⑤ [Crude Oil Price] Why it also affects Japanese household budgets
Finally, crude oil.
Following changes in the Middle East situation, crude oil prices fluctuated on October 9th as well.
When you hear crude oil, many people might think of gasoline.
However, the impact is not limited to that.
When crude oil prices rise, transportation and manufacturing costs increase, which can affect the prices of food and daily necessities.
For example,
crude oil prices rise
↓
gasoline and logistics costs rise
↓
corporate burden increases
↓
passing on to product prices
↓
household expenditures increase
is the flow.
Furthermore, Japan relies on imports for many energy resources.
Therefore, if the yen weakens in addition to rising crude oil prices, import costs may become even higher.
Even if crude oil prices fall, there are cases where domestic prices do not fall as much as expected due to the impact of the weak yen.
Crude oil and exchange rates are figures that you want to check as a set when thinking about household budgets.
☕ Take a little break here.
Naruto: “I thought that if both gold and stocks were rising, the economy must be good!”
Uzura: “But if interest rates are in the 5% range, it seems like the burden on both companies and households will be large.”
Menma: “That’s right🔎 Stock prices move on expectations for the future, and gold moves on various anxieties and demand. Even if the rise is the same, the reasons are different.”
Naruto: “I see! Just looking at the numbers in the news one by one isn’t enough!”
Menma: “Exactly. When you connect the numbers, economic news becomes more interesting.”
[Today’s Connections]
To organize today’s news,
US interest rates are high
↓
impact on borrowing burdens for companies and households
↓
caution regarding stock prices and the economy
On the other hand,
growth expectations for AI, etc.
↓
factors pushing up US stocks
And,
views on interest rates, the dollar, and inflation
↓
international gold prices fluctuate
↓
impact on domestic gold prices with the addition of a weak yen
multiple flows are occurring simultaneously.
Furthermore, if crude oil prices rise, it will also affect inflation and interest rate forecasts.
Things that cannot be seen from just one piece of news become easier to understand when connected like this.
[Summary/Menma POINT🔎]
On October 9th, gold prices rebounded by about 1.5%, and the US stock market also rose.
However, the US 10-year Treasury yield is at a high level of about 5.24%, and caution regarding crude oil prices and inflation continues.
That is why what I want to convey this time is:
Do not jump to conclusions like “gold rose = safe” or “stocks rose = booming economy.”
Those who sell gold should check the domestic gold price and the final purchase amount.
Those who buy gold should understand exchange rates and the buy-sell price spread.
Those who are investing should look not only at stock prices but also at interest rates and corporate performance.
And those who want to protect their household budget should think about the impact that the weak yen and crude oil prices have on their lives.
I think just doing this will greatly change how you view economic news.
Are you thinking of selling now that gold prices are rising? Or are you thinking of holding for the long term?
Please let me know in the comments!
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