U.S. Treasuries and gold surge together! The market faces three major storm centers: Trump's tariffs, AI panic, and Iran situation

Caixin February 24 News (Editor: Xiaoxiang) As U.S. President Trump vows to push forward with trade wars, injecting new uncertainty into global markets, investors flocked to safe-haven assets on Monday, driving both U.S. Treasury yields and gold prices sharply higher.

This wave of safe-haven asset buying caused the benchmark 10-year U.S. Treasury yield to fall about 5 basis points to 4.03%—as bond yields and prices move inversely—while spot gold prices surged past the $5,200 mark, reaching the highest level since January 30. In addition to tariff issues, fears triggered by AI disruption, a decline in U.S. stocks, and concerns over possible military strikes on Iran have further strengthened the upward momentum of these safe assets.

JPMorgan Portfolio Manager Priya Misra said, “The recent increase in trade uncertainty has led to risk aversion in equities and safe-haven buying of U.S. Treasuries. In the face of uncertainty, investors should reduce risk exposure.”

Currently, after the U.S. Supreme Court ruled to overturn the broad tariffs introduced by Trump last April, traders are weighing the impact of the latest threat of a 15% comprehensive tariff.

Last Friday, the Supreme Court ruled 6-3 that Trump’s tariffs under the International Emergency Economic Powers Act exceeded presidential authority. Trump strongly condemned the decision and then threatened to impose a temporary 15% tariff on all imports—even though the U.S. has already reached agreements with many trading partners.

Notably, the safe-haven sentiment triggered by new trade tariffs has temporarily overshadowed a major concern in the Treasury market last week’s end—that the government may need to issue more debt to cover fiscal revenue shortfalls or to refund part of the $170 billion in tariffs already collected.

Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, pointed out that one of the core concerns in the rate market was the loss of tariff revenue and the issue of refunds. But since refunds could take a long time and current tariff revenues have actually increased, these factors have somewhat alleviated some worries in the fixed income market.

In contrast, the impact on U.S. stocks is undoubtedly more direct—widespread selling sentiment led to all three major U.S. stock indexes closing down more than 1% on Monday. Market risk appetite was dampened by multiple factors: ongoing fears of disruptive AI breakthroughs and Trump’s inconsistent trade policy statements—these factors caused significant volatility in the market during his first year of a second term.

On Monday, a research report from industry analyst firm Citrini Research, based on a “June 2028 study,” and new use cases of Anthropic AI products, intensified concerns about AI disrupting traditional business models. Especially the scenario hypothesized in the report that by 2028, AI could lead to large-scale layoffs of white-collar workers, software-related loan defaults, and economic contraction, which directly contributed to declines in delivery, payments, and software stocks.

“There are two questions about AI: how high will its costs be? which sectors will be impacted?” said Tom Hainlin, investment strategist at U.S. Bank Wealth Management. “People are already reacting to news headlines—‘sell first, evaluate later’.”

He added, “This is a forecast of what might happen, not an endorsement of what has already occurred.”

Additionally, many analysts pointed out that amid escalating tensions between the U.S. and Iran, U.S. Treasuries and gold are also being sought after.

The U.S. has deployed one of its largest military forces in the Middle East in recent years. Trump warned last Thursday that if an agreement on Iran’s long-standing nuclear dispute cannot be reached, “very bad things will happen.” Iran responded by threatening to strike U.S. military bases in the region if attacked.

As geopolitical tensions intensify, investors will closely watch Trump’s State of the Union address on Tuesday—this sensitive timing has also boosted demand for U.S. Treasuries as a safe haven.

Subadra Rajappa, head of U.S. research at Société Générale, said, “In my view, the key factors are geopolitical risks, the uncertainty surrounding Iran, and the unknowns ahead of the State of the Union speech. Despite relatively strong economic data, multiple uncertainties are rising.”

Looking at the trend, the 10-year U.S. Treasury yield, often called the “anchor” of global asset pricing, has fallen to its lowest level since Thanksgiving last year, approaching the 4.00% level…

In terms of rate expectations, although traders largely dismiss the possibility of a rate cut at the Fed’s next meeting next month, U.S. interest rate futures on Monday reflected nearly 60 basis points of policy easing this year, equivalent to two 25-basis-point cuts, higher than last Friday’s expectation of about 55 basis points.

Torsten Slok, chief economist at Apollo Global Management, said that after the Supreme Court ruling and Trump’s announcement of new tariffs, his forecast experienced a rollercoaster over the weekend. He summarized that while the economy may remain fundamentally sound, tariffs will continue to exert upward pressure on U.S. inflation.

He stated, “There is indeed more uncertainty now. It’s like a tug-of-war: on one side, increased bond issuance could push yields higher; on the other, the uncertainty caused by high tariffs creates a counterforce—slowing economic growth and weakening demand.”

In precious metals, Jeffrey Christian, managing partner at CPM Group, said, “With many economic and political issues worldwide, coupled with subdued market activity during the Spring Festival, we expect that trading activity will pick up this week, potentially leading to a significant rise in gold prices.”