Japan’s latest wage negotiations delivered another strong outcome, with pay increases exceeding 5% for a third consecutive year , reinforcing expectations that the central bank may proceed with further policy tightening . Strong Wage Momentum Continues Japan’s largest labour federation, Rengo, reported: Average wage increase: 5.26% Base pay growth: 3.85% While slightly below last year’s initial 5.46%, the result still signals sustained wage momentum , a key condition for Japan’s long-awaited demand-driven inflation cycle . BOJ Rate Hike Expectations Firm The strong wage data supports the Bank of Japan’s (BOJ) path toward policy normalisation. Markets are pricing a ~64% probability of a rate hike in April The BOJ has indicated it may act if inflation trends remain intact despite external shocks This keeps Japan on track for a gradual tightening cycle , after years of ultra-loose monetary policy. Inflation Dynamics Backed by Wage Growt...
Gold prices plunged sharply, erasing all year-to-date gains, as escalating Middle East tensions triggered a surge in inflation expectations and interest rate risks, prompting aggressive selling across precious metals.
Gold Sees Fastest Selloff in Decades
Gold extended its losses for a ninth consecutive session, falling as much as 8.8% to near US$4,100 per ounce, before stabilising around US$4,225.
This dramatic decline follows what was already the worst weekly drop since 1983, highlighting the intensity of the current selloff.
Inflation Shock Drives Rate-Hike Expectations
The key driver behind the decline is a sharp shift in macro expectations:
- Oil prices remain elevated, fuelling inflation concerns
- Markets are increasingly pricing in higher-for-longer interest rates
- Central banks may delay or reverse easing cycles
Higher interest rates reduce the attractiveness of gold, as it does not generate yield, pushing investors toward interest-bearing assets.
Forced Selling and Liquidity Pressures Accelerate Decline
Analysts point to liquidity-driven selling as a major factor.
Investors have been forced to:
- Raise cash to cover losses in equities and other assets
- Trigger stop-loss levels, accelerating the decline
This has created a cascade effect, amplifying the speed and magnitude of the selloff.
Historical Pattern Suggests Potential Rebound
Despite the sharp drop, historical patterns indicate that gold may eventually stabilise.
In previous crisis cycles (2008, 2020, 2022):
- Gold initially declined during market stress
- Followed by a strong rebound as conditions stabilised
Currently, technical indicators show:
- RSI below 30, suggesting oversold conditions
- Speculative positioning still relatively elevated
Broader Precious Metals Also Hit
The selloff extended across the metals complex:
- Silver dropped over 10% intraday, later down 6.5%
- Platinum and palladium also declined sharply
Meanwhile, the US dollar strengthened, reinforcing pressure on commodities.
Geopolitical Escalation Intensifies Volatility
Tensions escalated further after:
- The US issued an ultimatum to Iran over the Strait of Hormuz
- Iran threatened to fully close the key energy route and target infrastructure
This has increased uncertainty across energy, currency, and commodity markets.
Investor Takeaways
- Gold has wiped out 2026 gains, with one of the fastest selloffs in decades.
- Rising oil prices and inflation fears are pushing expectations toward higher interest rates.
- Forced liquidation and liquidity pressures are accelerating market declines.
- Gold is now in oversold territory, suggesting potential for short-term stabilisation.
- Longer-term outlook depends on Fed policy, inflation trends, and geopolitical developments.
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