Amidst the intertwined influences of Trump’s global trade war, the uncertain policy paths of major central banks, and geopolitical uncertainty, global safe-haven and precious metals markets are experiencing significant divergence. The Japanese yen, once the “king of safe-haven assets,” is locked in a bull-bear duel, with the divergence in holdings between asset managers and hedge funds widening to a near 20-year high. Meanwhile, the precious metals market is performing strongly, with spot silver breaking its highest level since 2011 and gold approaching its all-time high, becoming a key hedge for investors. This divergence in asset performance is fundamentally due to the way global macroeconomic variables (such as trade patterns, central bank policies, and interest rate expectations) are reshaping the logic of different asset classes.

Yen bull-bear game: fading safe-haven halo and policy fog intertwined

The core contradictions in the current yen market stem from its weakening safe-haven properties and the Bank of Japan’s ambiguous policy path, triggering a divergence between long and short positions that has reached a level rarely seen in recent years. CFTC data shows that as of the week of September 16 (before the Bank of Japan’s interest rate decision), hedge funds’ net short yen positions increased to 58,811 contracts, while asset management companies still held 71,162 long positions. This divergence in positions reached its highest level since 2012, approaching the peak reached in 2007.

This divergence is mainly due to three macroeconomic pressures:

• Weakened safe-haven status : The yen’s safe-haven status has weakened amid global trade frictions. This year, the yen has appreciated only about 6% against the dollar, far less than the Swiss franc’s 13% gain.
• Policy and political uncertainty : The Bank of Japan’s policy is wavering. The September interest rate meeting kept interest rates unchanged, but there were differences among members. The market is focusing on the short-term outlook report on October 1 to determine whether there will be an interest rate hike.
• Real interest rate pressure : Even with expectations of rate hikes, low real interest rates still limit the yen’s upward momentum. Analysts point out that with low real interest rates, it is difficult for the yen to strengthen substantially.

Institutions generally believe this divergence will persist. Hedge funds are inclined to sell the yen due to political risks and interest rate uncertainty in Japan, while asset management firms believe the yen is undervalued, a logic difficult to reconcile. Currently, both sides’ positions are nearing extremes but not yet peaking, and the bull-bear pattern is expected to persist.

Gold and silver broke through strongly: Silver led the rise, undervaluation and leverage attributes highlighted

Unlike the yen’s struggles, the precious metals market, particularly silver, is attracting global attention with its breakthrough performance. During Monday’s Asian trading session, spot silver broke through its previous high of $43.50 per ounce, reaching a new high since August 2011. While spot gold is hovering near its all-time high, it has already risen nearly 40% this year, poised for its best annual performance since 1979. Silver has also surged 50% this year, leading the precious metals sector.

The core logic behind the bull market in gold and silver stems from macro-risk aversion demand , silver’s “double advantage” and gold’s “leverage shadow” effect :

• Rising demand for safe-haven assets : Adjustments in the global trade landscape, challenges to the Federal Reserve’s independence, and a weakening US dollar have boosted demand for gold and silver as safe-haven assets against inflation. The actions of institutional investors also confirm concerns about macroeconomic risks.
• Silver’s unique advantages : The current gold-silver ratio is about 90, significantly higher than the historical average, indicating that silver is undervalued relative to gold; at the same time, as a key material for semiconductors, solar energy, etc., it provides support for the rigid growth of industrial demand.
• Leverage properties are highlighted : Silver is often regarded as a “gold leverage product”, with better gains and greater volatility in a bull market, and significant elasticity in a trend market.

However, silver’s high resilience comes with high risks. Its industrial nature makes it closely tied to economic cycles, and an economic downturn could weaken demand. Institutional analysts are divided on the sustainability of its high levels, with HSBC predicting it will be difficult to sustain prices above $40 per ounce over the long term. While some institutions maintain a bullish stance, their optimism is cautious.

Summary: The macro logic behind asset differentiation and future focus

The current divergent trends between the Japanese yen and gold and silver are essentially a reassessment of the effectiveness of different safe-haven assets by global capital: the Japanese yen has lost its safe-haven appeal due to ambiguous domestic policies and the impact of the trade war, and has fallen into a game between bulls and bears; while gold and silver, with their triple attributes of “anti-inflation + safe-haven + industrial demand”, have become “hard currencies” under macro risks. In particular, silver, due to its undervaluation and leverage effect, has become the “leader” of this round of increases.

There are three key nodes that need to be focused on in the future:

1. Bank of Japan policy signals : The October 1st Tankan report and the Bank of Japan meeting will clarify the probability of an interest rate hike. If the policy shift signal is clear, it may break the deadlock between long and short positions in the yen.
2. Fed dynamics : This week’s speeches by Fed officials and inflation data will influence expectations of rate cuts. If inflation cools, reinforcing the logic of easing, gold and silver may rise further.
3. Changes in the gold-silver ratio : If the gold-silver ratio falls back to near the historical average, we need to be alert to the end of silver’s “catch-up rally” and funds may flow back into gold.

For investors, the current market differentiation means that the two types of assets need to be “treated differently”: the Japanese yen should be viewed from a wait-and-see perspective in the short term, awaiting clear policy signals; although gold and silver are at high levels, they still have allocation value in the context of lingering macroeconomic risks, but the volatility risk of silver needs to be controlled.