Gold blasted past $3,500 a troy ounce for the first time ever after Trump escalated his feud with Federal Reserve chair Jay Powell, kicking the legs out from under the US dollar and shaking global markets.
The surge came after Trump posted on Truth Social Monday night, labeling Powell “Mr Too Late” and demanding the Fed cut rates “NOW.” The clash raised investor fears over the economy and sent traders straight into haven mode.
Investors scrambled to park their money somewhere less exposed to the chaos in Washington. Trump, now back in the White House, reignited pressure on Powell just days after the Fed Chain warned that the administration’s tariff blitz could increase inflation and slow down growth.
The rising tension between the president and the central bank rattled an already jittery market still dealing with the fallout from US trade policies.
Markets didn’t wait to react. The S&P 500 dropped 2.4%, while the Nasdaq cratered 2.6%. Over in Europe, the Stoxx Europe 600 lost 0.7%, and London’s FTSE 100 opened flat.
The dollar index, which compares the greenback against a basket of major currencies, slipped another 0.2%, dragging its yearly decline close to 10%. The yen strengthened past ¥140 per dollar, something that hadn’t happened since last September.
The bond market barely budged, though it wasn’t calm. 10-year Treasury yields edged up 0.02 points to 4.43%, and the 30-year yield rose the same to 4.93%. The minimal move reflected caution more than confidence.
Gold didn’t just climb on drama. It’s been rising all year, up 33% since January. Some investors use it to guard against inflation. Others just want something that doesn’t involve the Fed or the dollar. Data from Standard Chartered showed that more than $19 billion flowed into gold-backed ETFs in the first quarter alone.
The dollar index, stuck at 98.33, hovered just above its lowest point since March 2022, after sinking to 97.923 the day before. The greenback keeps falling as investors flee US assets or hedge against potential rate cuts.
Meanwhile, The ownership of the US Treasury market has taken center stage under market volatility and investor uncertainty, buoyed by US President Donald Trump’s tariff policies. The US 10-year Treasury note yield stood at 4.41% on Tuesday, April 22, based on over-the-counter interbank quotations for the benchmark government bond.
Global investors are interested in who holds the debt underpinning the US government’s massive borrowing program and what could happen if those holders begin to exit.
US Treasurys, often considered the ultimate safe-haven asset, are valued by their minimal credit risk. They are backed by the full faith and credit of the government and help finance federal expenditures.
Turbulence in financial markets, caused by US President Trump and his plan to scale down trade deficits, has placed the Treasury market in limbo. Historically, this kind of political upheaval typically drives investors toward Treasurys, pushing yields down in turn.
This time, the trend reversed course. Yields on 10-year Treasurys dipped below 4% before rising and peaking near 4.7%, just 0.1% less than levels it had reached a week before Trump entered the White House.
Foreign holders of US Treasurys account for about 33% of all outstanding debt. However, recent market signals suggest that global investors may be pulling back.
Through the end of February, just before the recent sell-off, Treasury Department data revealed the top 10 foreign holders of US debt. Japan is the largest at $1.125 trillion, followed by China at $784 billion, and the United Kingdom at $750 billion.
The Cayman Islands, Luxembourg, Canada, Belgium, France, Ireland, and Taiwan rounded out the top 10, each holding between $295 billion and $418 billion.
Several other countries also hold substantial amounts, including Switzerland ($291 billion), Hong Kong ($274 billion), Singapore ($260 billion), and India ($228 billion). The combined holdings of all other countries stood at $1.642 trillion, bringing total foreign ownership of US Treasurys to $8.817 trillion as of the end of February.
According to JULISHA MEDIA Financial Analysts, a sustained reduction in foreign ownership of US Treasurys could create financial hiccups for the federal government. Large-scale sell-offs by foreign governments would push bond prices down and yields up due to the inverse relationship between the two.
Higher yields mean the government would need to offer greater returns to attract buyers, which could “force” the US central bank to raise borrowing costs.
In fiscal year 2023, the US government spent approximately $881 billion on interest payments alone, a high that surpassed spending on Medicare and the Department of Defense. According to the Treasury Department’s fiscal data website, the interest cost shot up partly because of a rapidly growing national debt, which has exceeded $36 trillion and counting.
The Congressional Budget Office (CBO) projects that interest payments will climb to values as high as $952 billion this fiscal year, accounting for a record 3.2% of gross domestic product (GDP).
The CBO also believes interest payments will continue to consume a larger share of economic output. By 2055, interest costs are expected to reach 5.4% of GDP.
By the following decade, the average interest rate on US government debt is projected to surpass the country’s economic growth rate, which is a red flag for the long-term fiscal sustainability of the US economy.
