In The Markets: All Eyes On Gold - the new "Fear" Index
- SYL+JAS
- Apr 11
- 4 min read
Updated: 10 minutes ago
The U.S. financial system is teetering, and gold is screaming a warning, perhaps to the point of taking its place alongside the VIX, or what the markets label as the "fear" index.
Following Tuesday night’s U.S. bond market crash, there was an emergency Bank of Japan meeting held. What transpired then was Treasury Secretary Scott Bessent’s bond boosterism during the 10-year Treasury auction, and President Trump’s tariff delay, which sparked an epic short-covering rally in equities.
However, the real story lies in gold’s relentless (and scary) climb in the midst of all the stirring and brewing.
Gold’s Meteoric Rise: Surge Signals Trouble
Gold has soared ~20% year-to-date, a stark contrast to the U.S. dollar’s ongoing slide and the chaos in bonds and equities. The metal has hit all-time highs at $3,210 per ounce at the time of this writing.
Why?
Well, investors are fleeing uncertainty. One cannot miss the fact that Trump and Bessent’s attempts to shore up U.S. Treasuries as a premier asset—by pressuring equities lower to force a rotation into bonds—have flopped spectacularly. The bond market, already fragile, needed overt intervention to avoid collapse this week. That’s not a sign of strength; it’s a huge red flag.
The S&P 500 has bled $9.6 trillion in market value this year, per Forbes, with $5.83 trillion vaporized in just four days after Trump’s initial tariff announcement.
Equities are reeling and bonds are barely clinging to a 1% return. Risk-parity portfolios—those stock-bond blends—are broken, and this exposes investors to massive risks as Treasuries lose both value and credibility. Fixed income, the world’s second-largest market after currencies, is cracking under the weight of policies that are not delivering for bondholders.
Meanwhile, gold thrives. It’s not just a hedge; it’s a verdict on U.S. fiscal policy. As the dollar weakens and yields climb—10-year Treasury yields are now higher than before tariffs were announced and after they were delayed—gold’s ascent reflects a market losing faith in traditional safe havens.
Trump & Bessent’s Failed Playbook
Trump and Bessent’s efforts are falling apart in their bid to stabilize markets by delaying tariffs and talking up bonds hasn’t quelled the volatility. Even their attempt to lift oil prices (by easing intervention collars) to pull yields lower backfired; crude oil is down 15% year-to-date, with half of that since April 2. Yields keep rising, the dollar keeps falling, and gold keeps climbing. This is not a sign that the Trump administration is in charge. It is utter chaos.
The psychological and financial toll of a mercurial administration is eroding U.S. fiscal credibility. Tariff flip-flops and dollar hegemony debates have sown permanent uncertainty. Investors, businesses, and global partners are not just hedging—they are selling to raise cash as collateral values tank.
It should also be well-noted from on the fact that funds with trillions in leveraged bets on U.S. bonds are scrambling for liquidity. That is not a market vote of confidence. It is panic in progress.
Follow Gold - 5 Shiny Clear Signals of a Structural Shift that Spells FEAR
As markets price in a rising risk of U.S. debt default or debasement, gold’s trajectory offers a clear signal. Here’s what investors should be looking for to track the market's trajectory:
Central Bank Buying: Global central banks, led by China and India, have added 1,200 tonnes to gold reserves this year, per the World Gold Council. This is not speculative—it is strategic, signaling a shift away from dollar reliance.
Gold vs. Dollar Weakness: Gold’s inverse relationship with the dollar is intensifying. The DXY index is down 8% this year, and every dip fuels gold’s rally. If the dollar breaks below its 2025 lows, expect gold to push higher.
Yield Divergence: 10-year Treasury yields are pushing 4.5%, yet gold is not flinching. Historically, rising yields could pressure gold, but its strength suggests investors see yields as a symptom of fiscal distress, not economic health. Just this week, it is up 46 basis points, the biggest increase since 2001.
Retail Demand Surge: Gold ETFs like GLD have seen $4 billion in inflows since March, while physical gold demand (coins, bars) is spiking in the U.S. and Asia. When retail piles in, it’s a sign fear is going mainstream.
Gold-to-Debt Ratio: The U.S. debt-to-GDP ratio is at 125%, and gold’s rise tracks growing concerns about unsustainable borrowing. If gold outpaces debt growth, it’s a market bet on debasement.
Are We Heading for the Cliff Yet?
The U.S. is skating dangerously close to a default, not because of missed payments but because faith in its debt is crumbling. Trump and Bessent’s interventions may delay the inevitable, but they are not fixing the cracks. Investors are moving to the exits, and gold is a signal of them bailing for their lifeboats.
As bond volatility spikes, equities crater, and the dollar fades, gold’s climb is the market’s way of saying: the U.S. is losing control. Keep watching the metal—it clearly tells you where this is all headed.
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