Gold Tops $5,000; Saudi Arabia Postpones Winter Games | Horizons Middle East & Africa 1/26/2026

Key Concepts

• Market Intervention: Government or central bank actions to influence currency exchange rates or other market prices.
• Safe Haven Assets: Investments typically sought during times of market turbulence or geopolitical uncertainty (e.g., gold, silver, Yen).
• Dollar Weakness: A sustained decline in the value of the U.S. dollar against other major currencies, driven by factors like current account deficits, national debt, and geopolitical shifts.
• "Basement Trade": A term used to describe a move away from U.S. assets, often due to a loss of confidence or desire for diversification.
• Government Shutdown: The cessation of non-essential government services due to a failure to pass appropriation bills.
• Department of Homeland Security (DHS) / Immigration and Customs Enforcement (ICE): U.S. federal agencies involved in border security and immigration enforcement.
• "Sell America" Trade: An investment strategy based on the expectation of underperformance of U.S. assets, particularly bonds, due to fiscal concerns and loss of safe-haven status.
• Direct Lending: A form of private credit where non-bank lenders provide loans directly to companies.
• Private Equity (PE): Investment in companies not listed on a public stock exchange, often involving "stuck private assets" that require customized solutions for liquidity.
• Hyperscalers: Large cloud computing providers (e.g., Amazon, Microsoft, Google, Meta) that operate at massive scale.
• NIMBYism (Not In My Backyard): Opposition by local residents to proposed developments in their area.
• Vision 2030: Saudi Arabia's strategic framework to reduce its reliance on oil, diversify its economy, and develop public service sectors.
• Central Military Commission (CMC): The highest decision-making body for the People's Liberation Army in China.
• Fiscal Consolidation: Government policies aimed at reducing budget deficits and debt accumulation.

Global Market Overview and Economic Indicators

The global markets are experiencing significant shifts driven by geopolitical uncertainty, U.S. domestic political developments, and a weakening U.S. dollar. S&P Futures and Nasdaq are down by approximately 0.2-0.3%, reflecting a minor pullback. The Federal Reserve meeting this week is unlikely to result in interest rate changes, but the language regarding the U.S. economy will be closely monitored. Brent Crude has rebounded to nearly $66 per barrel, up 0.2% today, from around $60 a week or two ago.

Yen Strength and Potential Market Intervention

The Japanese Yen is trading 1% firmer against the U.S. Dollar, reaching the 154 level, its strongest since November. This significant move is attributed to expectations of potential market intervention by Japanese authorities. The Japanese Prime Minister has indicated readiness to take action against speculative moves. This Yen strength is putting pressure on Japanese stocks, particularly exporters like Toyota, which are down about 2%.

Bloomberg Editor Mark Cudmore notes that the Yen's turnaround is intensifying broader dollar weakness, which has been a consistent downward trend since 2025 and continues into 2026 with no signs of abating. The dollar's decline is fundamentally driven by the U.S. current account deficit, large debt problems, and the country undermining its trading relationships globally. While the Dollar-Yen is currently trading about five Yen below its Friday level (159.20), market momentum might negate the need for physical intervention. However, if the Dollar-Yen rises again, aggressive selling by authorities could occur. Macro Advisor suggests that actual hard intervention might not be necessary as comments alone are already supporting the Yen.

Precious Metals Rally

Gold has hit $5,000 per ounce for the first time ever, up 1.7% today and 9% in the past week. Silver has also seen stunning moves, up 15% in the past week, more than doubling in the last two months alone, and up about 55% year-to-date, trading 13-40% above its Friday morning level. This surge in precious metals is driven by geopolitical uncertainty and a "basement trade" – a move away from U.S. assets and diversification from the dollar due to a lack of standout candidates among other fiat currencies.

The fundamental reason for this rally is strong, but the "crazy" moves suggest declining liquidity and new buyers entering at elevated prices. A potential catalyst to derail this momentum could be an acceleration of stock market declines, forcing investors to sell winners like precious metals to cover losses. Macro Advisor emphasizes that uncertainty is the primary driver. While prices might not sustain $5,000, strong underlying demand from data centers and AI expansion could establish a floor, preventing a return to levels like $2,000. Copper is also identified as another metal attracting investment.

U.S. Domestic Politics and Government Shutdown Risk

Outrage is growing in the U.S. following the killing of a man in Minneapolis by Border Patrol agents. Senate Democratic Leader Chuck Schumer has vowed to block a massive spending package unless Republicans strip funding for the Department of Homeland Security (DHS) and ICE. This raises the risk of a partial government shutdown by the Friday deadline, just two months after the longest shutdown in U.S. history.

Democrats are leveraging this incident, believing public opinion on immigration is turning in their favor, giving them political advantage. Some Republican lawmakers are also becoming uneasy with ICE operations. Macro Advisor views a potential shutdown as a "disaster," recalling how the late 2025 shutdown rattled markets and pressured decision-making and data output. The political landscape is marked by uncertainty, especially in a significant election year with midterms approaching.

"Sell America" Trade and Bond Market Concerns

The "Sell America" trade is gaining traction, though Macro Advisor argues it's more relevant to the bond market than equities. While the AI story continues to drive equity markets (with 20% year-on-year growth expected this quarter), the bond market is "scary." Investors are losing faith in U.S. Treasuries, leading to their replacement with assets like gold. Increased fiscal spending in the U.S. is expected to push yields up on the long end of the curve, further adding to the national debt. This undermines the U.S. dollar's traditional role as a safe haven, leading to depressed dollar pricing due to a lack of demand for Treasuries. This environment, characterized by a weaker U.S. dollar, could lead to strong performance and further rallies in emerging market assets, mirroring trends seen in 2025.

Six Street's Expansion into the Middle East

Global investment firm Six Street, managing over $130 billion, is opening an office in Abu Dhabi later this year. Co-founder and CEO Alan Waxman explains that this move is driven by the region's attractive growth outlook, pro-business environment (diversifying from oil), and exciting consumer demographics. Six Street's investment strategy, spanning real estate, infrastructure, growth, tech, sports, restaurants, healthcare, and wellness, is highly applicable in the region.

While Six Street already has close ties to capital sources and investors in the region, the expansion is a strategic priority, particularly for building out their GCC presence, led by new partners from Goldman Sachs with over 20 years of regional investment experience. The firm is capable of writing multi-billion dollar checks through its opportunistic private capital vehicle (the largest globally) and also operates a mid-stage growth fund, indicating a long-term, methodical, and relationship-focused approach to capitalize on opportunities across all platforms.

Regarding private assets, Waxman notes that direct lending saw compressing yields last year, a controversial but now evident trend, exacerbated by wealth capital inflows regardless of optimal investment timing. In private equity, trillions ($3-5 trillion) of "stuck private assets" represent the biggest opportunity, requiring "artisanal customized solutions" rather than off-the-shelf investments. The Middle East, unlike more mature developed markets with slower IPO exits, is "in a great part of the curve" with significant growth potential for liquidity events.

On the AI/Tech ecosystem, Waxman, based in Silicon Valley, observes a new focus on "power generation" within the tech vernacular. While hyperscalers show significant demand for the foreseeable future, constraints include securing power (longer, more expensive), chip availability, regulatory hurdles, and NIMBYism in the U.S. Other regions may build power plants faster. Most hyperscalers are reinvesting unlevered free cash flow, though Meta has used off-balance-sheet financing. Shareholder pressure, rather than hyperscaler pullback, might be the only factor to slow down AI expansion, despite immense demand from consumers and companies.

Saudi Arabia's Vision 2030 and Neom Winter Games

Saudi Arabia and the Olympic Council of Asia have postponed the 2029 Asian Winter Games, which were planned for the Neom ski resort. This decision confirms earlier concerns about the feasibility of building a ski resort in the desert. Reasons cited include massive cost overruns, topographical and engineering challenges, and the inability to complete the project on time, including the need for a three-kilometer lake to supply artificial snow. While the language is "postponed," suggesting a potential scaled-back project in the future, it reflects a re-evaluation of ambitious projects within Saudi Arabia's Vision 2030. The Kingdom is shifting from a "full throttle" approach to a more pragmatic "fine-tuning" of spending and prioritizing projects, a move supported by international banks.

Middle East Tensions and Flight Suspensions

Rising tensions between the U.S. and Iran have led several European airlines, including Air France, to suspend flights to and over countries in the Middle East, such as Dubai and Tel Aviv. This disruption follows President Donald Trump's comments about deploying naval assets to the region.

China's Military Purge and Geopolitical Implications

Chinese President Xi Jinping has initiated a probe into his top general, Zhang, who is accused of corruption and allegedly passing secret information about China's nuclear weapons program to the U.S., as reported by the Wall Street Journal. This is described as a stunning development, potentially the most shocking change in the Chinese military in half a century, as Zhang was second only to Xi. Both Zhang and another member of the Central Military Commission have been effectively removed. Official reasons include corruption and attempts to create "cliques" undermining Xi's authority.

This purge has significant implications:

• Military Disarray: The top military body is now in disarray, with only two members remaining from seven, raising questions about how a military of that size can be run without top leadership.
• Taiwan: The impact on a potential invasion or military operation against Taiwan is debated. Some believe disarray makes it less likely, while others suggest it might compel the military to act to prove its capability. Opinion remains split.
• Succession: The purge solidifies Xi Jinping's absolute control over the top ranks of the Communist Party. Zhang was seen as one of the few individuals with the status to challenge Xi's power. Xi is expected to secure a fourth term as party leader in 2027, and he will need to find trustworthy and capable individuals to fill the vacancies.

South Africa's Economic Outlook and Davos Insights

South Africa's Finance Minister expressed confidence in reaching a trade agreement with the U.S., noting active negotiations and tabled proposals. He highlighted Davos as an important institution for information exchange and networking. On AI, he views it as a critical instrument that will fundamentally change industries, warning that countries risk losing technology if they don't adapt. Regarding fiscal policy, he emphasized the difficult balancing act between fiscal consolidation and scaling up public investment for growth. Maintaining fiscal concerns is crucial while driving growth-enhancing reforms, a task made trickier by new "puzzles" like AI and geopolitical risks.

Synthesis/Conclusion

The global economic and political landscape is characterized by heightened uncertainty and significant shifts. Financial markets are reacting to a weakening U.S. dollar, driven by fundamental economic issues and geopolitical tensions, leading to a massive rally in safe-haven assets like gold and silver. Concurrently, U.S. domestic politics are volatile, with a potential government shutdown looming due to disputes over immigration policy and DHS funding, further contributing to market unease and potentially accelerating a "Sell America" trend, particularly in the bond market. Meanwhile, major investment firms like Six Street are strategically expanding into high-growth regions like the Middle East, adapting to evolving investment opportunities and challenges in private assets and the AI ecosystem. Geopolitical tensions are also evident in China's unprecedented military purge, raising questions about internal stability and regional implications, and in the Middle East, leading to flight suspensions. These interconnected developments underscore a period of profound re-evaluation and strategic adaptation across global finance and politics.