$6T Floods into Gold as Trump’s Tariffs Shake Markets—Bitcoin Starts to Break Free
Digital Asset Market: Alternative assets are taking the spotlight as gold surges to a record $3,500 per ounce, adding $6 trillion in market cap this year, three times the bitcoin market cap at its all-time high, amid a massive inflow into gold ETFs not seen since 2022. Bitcoin, while trailing gold’s meteoric rise, is also gaining ground, hitting new highs in dominance and breaking its correlation with U.S. tech stocks, prompting market-watchers to expect increased volatility with $6.7 billion in bitcoin options expiring soon, including notably large bets at the $100,000 strike price. Meanwhile, the U.S. SEC has new leadership with Paul Atkins taking over from the crypto-critical Gary Gensler, potentially heralding a friendlier attitude toward digital assets, as Commissioners Uyeda and Peirce have already initiated pro-crypto reforms such as reducing enforcement actions, clarifying regulatory boundaries, and opening industry dialogue. In Europe, Dutch bank ING is developing a stablecoin—possibly as part of a consortium with other banks—to take advantage of new MiCA regulations, which require stablecoin issuers to obtain authorization and open the door for euro-pegged stablecoins to expand in a market traditionally dominated by dollar-based assets.
Macro Economics: The International Monetary Fund (IMF) has sharply cut its global economic growth forecasts for 2025 and 2026 following the escalation of trade wars, particularly due to President Donald Trump’s introduction of substantial “reciprocal” tariffs in early April 2025. These tariffs, which quickly triggered retaliatory measures from major trading partners like China, not only roiled stock markets—causing a 9% drop in the S&P 500—but have created significant headwinds for both the U.S. and global economies, prompting the IMF to lower its U.S. growth outlook for 2025 to 1.8% (down by 0.9 percentage points from January) and the global growth projection to 2.8% (a 0.5 point cut), while also raising U.S. recession odds to 40%. The IMF cited softening consumer confidence and weaker consumption data as additional drags on the economy and, due to these supply shocks, revised inflation forecasts for the U.S. and other advanced economies higher: U.S. inflation is now seen at 3% in 2025, up a full point, with average inflation for advanced economies at 2.5%. For China, expected GDP growth for 2025 and 2026 has been cut to 4%, while the EU outlook has been trimmed modestly, and the IMF has also slashed global trade volume growth projections. The April 2 rollout of tariffs (with subsequent rounds raising levies as high as 145% on Chinese goods and China’s retaliation rising to 125% on U.S. goods) forced the IMF to hastily revise its nearly finalized forecasts, warning that the trade war’s negative impact will worsen if tariffs remain long-term and that both China and the U.S. could face even steeper losses beyond 2026.
Equities: Stocks rebounded Tuesday after a sharp sell-off on Monday, with the Dow rising 662 points (1.7%), the S&P 500 up 1.8%, and the Nasdaq gaining 3.1%. Gains were led by Tesla (up 3% before its earnings report), Netflix (up 4%), Meta (up 1%), Amazon (up 2%), and 3M (up 6% after strong earnings). Monday’s decline was triggered by President Trump’s criticism of Federal Reserve Chair Jerome Powell, warning that the economy would slow if the Fed didn’t cut rates, and hinting at Powell's potential removal. These remarks added to investor concerns caused by ongoing uncertainty around Trump’s new tariffs, which have dropped major indexes more than 9% since early April. Analysts say this combination of tariff worries and Fed criticism is increasing market volatility.
The Fed and US Treasury: Gold prices surged to record highs, reflecting investors' anxiety over President Donald Trump’s escalating public attacks on the Federal Reserve’s independence and ongoing trade tensions. Gold futures climbed as high as $3,509.90 per ounce after closing at a record $3,425.30, amid a year-to-date rally of 31%, supported by central bank purchases and safe-haven demand in volatile markets. Trump's intensified pressure on Fed Chairman Jerome Powell—including demands for immediate interest rate cuts and personal insults—shook market confidence, causing the Dow to plummet by over 970 points. Meanwhile, Chicago Fed President Austan Goolsbee noted that Trump’s sweeping tariffs are prompting businesses and consumers to engage in “preemptive purchasing,” temporarily inflating economic activity but likely resulting in a summer slowdown once inventories and big-ticket purchases are exhausted. Goolsbee acknowledged uncertainty about future tariff adjustments and highlighted the challenges faced by business owners already squeezed by steep import levies, especially on goods from China. Despite these near-term disruptions and volatility, Goolsbee remained optimistic about the U.S. economy’s fundamentals, pointing to a stable unemployment rate and easing inflation, provided the nation can weather the shocks from trade policy and political interference with Fed autonomy.
Geopolitical: President Trump has continued his public criticism of Federal Reserve Chair Jerome Powell, even suggesting he might fire Powell if he chooses. This has sparked concerns among market strategists about the potential erosion of the central bank’s independence and the resulting negative impact on investor confidence in US assets. On Monday, Trump escalated his rhetoric on Truth Social, pressing for immediate interest rate cuts and harshly labeling Powell a "major loser." This turmoil added to a series of market anxieties, including worries over the administration's tariffs and uneven AI growth at Big Tech firms, causing the S&P 500, Dow, and Nasdaq to close down more than 2%. The US Dollar dropped to a three-year low while Treasury yields edged up, signaling investor unease. Analysts warn that forcibly removing Powell could spike risk premiums, destabilize the bond market, and further roil equities, especially amidst Trump’s unpredictable trade policies and ongoing trade war with China. Amid this market volatility, US Vice-President JD Vance met with Indian Prime Minister Narendra Modi in Delhi to discuss progress on key trade negotiations, reflecting a US focus on strengthening ties with India as tensions with China escalate. Meanwhile, China has accused the US of abusing tariffs and pledged reciprocal action, heightening global uncertainty. Despite a rebound in US stocks on Tuesday, persistent unpredictability in trade policy and monetary leadership continues to cloud the outlook for investors.
View from our desk
This week marked a sharp rise in Bitcoin prices, diverging from continued sell-offs across U.S. equities. Political pressure on Federal Reserve Chair Jerome Powell to cut interest rates has added to volatility in traditional markets, prompting some investors to seek refuge in alternative assets like gold—followed more cautiously by Bitcoin. While bullish momentum could carry BTC higher, a surge past the $100,000 mark is unlikely in the near term. A significant volume of $100K call options expiring Friday suggests that sellers will resist further upside unless a major buyer forces a gamma squeeze, which remains speculative.
Encouragingly, Bitcoin’s price action is beginning to decouple from equities, signaling a potential shift in its correlation with risk assets. This may hint at growing confidence in BTC as a hedge, particularly in times of macroeconomic uncertainty. That said, institutional flows remain cautious, as most continue to monitor how much of this rally is driven by technical positioning versus fundamental conviction. As such, while higher prints are possible, expectations should be tempered without a stronger catalyst.
On the broader macro front, traditional markets rebounded today after yesterday’s decline, though the backdrop remains tense. Former President Trump’s public pressure on Powell has stoked rate-cut speculation, but the bigger issue looming over markets is the resurgence of tariff threats and policy uncertainty. While it’s unlikely Trump would go so far as to replace the Fed chair, his rhetoric is already injecting fresh political risk into markets. For now, the focus shifts from rates to trade, leaving investors to brace for heightened cross-asset volatility.
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The 1Konto Team
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