Gold approaches $5,000 as BOJ rides to rescue of bond market and UK retail sales rise

There has been some good news for the UK economy this morning. Retail sales were stronger than expected, sales including fuel rose by 0.4%, sales excluding fuel were up by 0.3% and 3.1% YoY. The December sales data reversed losses for November, as online sales were particularly strong in the lead up to Christmas, according to the ONS.

UK jewelry sales surged even as gold and silver reached records

Strong demand for gold and silver jewelry last month was noted, even as both metals saw their prices rise rapidly. The ONS said 2025 saw a second consecutive rise in retail sale volumes, although volumes remain below their pre-pandemic highs.

This news offers hope for Q4 growth; however, it may have a limited market reaction as the ONS said that sales data has been subject to more revisions in 2025. This data has failed to boost the pound, as the dollar catches a bid this morning.

Mixed outlook for stocks to end the week

European equity market futures are lower as we reach the last trading day of the week. Stocks had an impressive rebound on Thursday after Donald Trump dropped his tariff threat on European allies, however, the UK index lagged the rally, as it was dragged down by a weaker oil price, which weighed on the oil majors, and a sell off in defense names.

US futures brush off Intel weakness and JP Morgan fears

FTSE 100 futures are pointing to a slightly weaker open later this morning, although US equity futures remain in positive territory, even after Intel’s stock price dropped sharply after reporting weaker than expected Q1 guidance, and JP Morgan could also see some stock market weakness later today after Donald Trump said that he would sue the bank for $5bn.

Demand for risky assets remains robust even if investors must navigate tricky geopolitical waters. Asian stocks rose to fresh records today and are on track to outperform US and European equities this week.

Asian stocks reach records as Japanese bond market recovers

Asian stocks have been in demand all year, however, deteriorating diplomatic relations between the US and Europe could attract more inflows to Asia. Added to this, the Japanese bond market has mostly recovered from the sell off earlier this week, and 30-year Japanese yields are up only 2.2 bps this week overall. The Bank of Japan held interest rates at 0.75%, as expected, although the Bank of Japan did come out and say that they could conduct ‘bond market operations’, i.e., they will continue to be the backstop for the Japanese bond market.

BOJ April rate hike failing to boost the yen

This has weighed on the yen, even though the BOJ also raised their inflation forecasts for this year, which has pushed up the chance of an April rate hike to 56% from 20% earlier this week. However, the FX market is focused on Ueda’s comments that the BOJ could intervene in the bond market in exceptional circumstances, and the yen is the weakest currency in the G10 FX space on Friday, capping off a bad week where USD/JPY is higher by 0.5%.

Pound shrugs off Burnham fears, for now

The pound has managed to shrug off fears that Kier Starmer could be replaced as PM by Andy Burnham. There were concerns that he would stand as an MP, which would be one way for him to get to 10 Downing Street. However, this was not greeted with enthusiasm by other Labour ministers on Thursday. Although Burnham says that he will not be in ‘hock to the bond markets’, it looks like other Labour ministers are, and they do not want a financial crisis on their watch. Thus, although UK yields remain elevated after yesterday’s jump higher, there is still no clear consensus for Burnham to replace Starmer, which could limit any sell off in the UK bond market this morning.

Gold: next stop $5,000

Commodities are also in focus this morning. The weak dollar is helping to push gold to a fresh record high. The gold price is higher by more than 7% this week and is up $20 so far on Friday. There is no stopping the gold price right now, as the $5,000 per ounce level beckons. Investors may be willing to buy stocks in this environment, but geopolitical risk and an unconventional US President is keeping demand for the yellow metal alive as we move through January.