MacroResearchBoard

All That Glitters IS Gold – April 28, 2025

A just-published report updated our investment recommendations, which remain defensive given the ongoing trade war and the slide towards a stagflationary environment in the DM world. Market rioting, especially the Treasury market, finally pushed President Trump to pullback on escalating the tariff battle and halted (for now) his calls to end Fed independence. However, heightened economic and inflation uncertainty will persist.

Gold has proven to be by far the most resilient, whether the backdrop is risk-on or risk-off. Prices have soared for a variety of reasons, all of which are sustainable barring a significant, and improbable, shift in various macro forces, such as:

• An end to the budding bear market in the U.S. dollar.
• Much higher real bond yields.
• A significant shift in Washington towards reducing ever-larger U.S. budget deficits.

At worst, gold prices are now extremely stretched/overbought, and a consolidation phase may soon occur. However, a lasting bear phase in gold awaits a material change in the macro backdrop, which is most unlikely for the foreseeable future.