Gold Breaks $3,900 as Japan’s Political Shake-Up Sends Yen Lower

Daily Market Insights – October 6, 2025, brought to you by Ultima Markets

Market Recap: Risk, Safe-Haven & FX Flux

Markets opened on a strong note on Monday morning as global equities market and futures extending gain, with particularly the Japan Nikkei225 further surge to another record high on Japan Election outcome.

Still, safe-haven flows remained omnipresent amid persistent macro uncertainty—especially in light of the U.S. government shutdown, gold surges past the 3900 mark on Asian session on Monday.

Meanwhile, the U.S. dollar rebounded modestly after a four-day slide, though underlying weakness persists as traders await confirmation from labor data releases and brace for potential more macro data delays.

Japan Elections Upsets Market Expectations

Market highlights for earlier this week come in with the surprise outcome, where Sanae Takaichi won the leadership contest of Japan’s ruling Liberal Democratic Party (LDP), positioning her to become the country’s next prime minister and also the first female Prime Minister in Japan.

Her victory was immediately met with strong market reactions:

• Equities soared: The Nikkei jumped more than 4%, setting new highs on the optimism of pro-stimulus policy shifts.
• Yen weakened sharply: USD/JPY spiked as the currency’s downside outlook intensified under expectations of delayed BoJ tightening.
• Policy shift expectations: Her dovish fiscal and monetary leanings dampened near-term rate hike expectations from the Bank of Japan.

This leadership change signals a tilt toward more aggressive fiscal stimulus, which markets view as likely to delay or moderate further BOJ tightening — a prospect that continues to weigh on the yen.

On the technical front, USD/JPY opened with a gap higher above 149.00 on Monday and extended its intraday move toward the 150.00 level once again.

The rally was driven by Japan’s leadership change, which signaled a shift toward more aggressive fiscal stimulus under Sanae Takaichi, a policy dove. Markets interpreted her victory as likely to complicate the Bank of Japan’s tightening path, reinforcing expectations that rate hikes will remain gradual and limited.

At present, USD/JPY faces immediate resistance around the 150.00 psychological level. If price action holds above the 149.00–150.00 zone, the pair could stage another leg higher in the near term.

Unless the Bank of Japan adopts a more hawkish tone or commits firmly to upcoming rate hikes, the yen is likely to stay weak. Still, given the broader global uncertainty and volatility in the U.S. dollar, sharp short-term reversals cannot be ruled out.

Gold Rally Fueled by Safe-Haven Demand & Yen Havoc

Gold surged past $3,900/oz for the first time as investors sought refuge amid volatility and political risk. The rally was bolstered by three reinforcing forces:

1. Yen weakness—as the yen tumbled post-election, gold gained additional safe-haven appeal.
2. U.S. dollar uncertainty—the mixed rebound in USD has kept gold’s upside open where dollar strength falters.
3. Rate cut expectations—markets are pricing in further Fed easing, supporting non-yielding assets like gold.

Nevertheless, with gold surpassing the $3,900 mark, market sentiment has strengthened around the view that the rally may be sustained and could soon target the $4,000 level, keeping the metal firmly within a super-bullish outlook.

On the technical front, gold’s advance above $3,900 reinforces its strong bullish structure as long as prices hold above the key support zone of $3,900–$3,895, especially with ongoing macro risks such as the U.S. government shutdown.

Immediate resistance is seen near $3,942 (Fibonacci 161.8%) and around $3,940–$4,000, both acting as key psychological levels.

That said, traders should stay cautious of potential overbought conditions — momentum could slow, and resistance near record highs may trigger short-term profit-taking or consolidation if bullish conviction weakens, but only if a meaningful reversal pattern do form on near-term trend.

Disclaimer

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