Gold — not the dollar or Treasurys — is the new ‘risk-free' asset as Israel-Iran conflict rattles investors

Yahoo

15-06-2025

Gold prices settled at a fresh record high on Friday, as Iran launched retaliatory missile strikes against Israel less than 24 hours after a widespread Israeli attack against Tehran's nuclear sites.
'Gold is the new risk-free asset in people's mind,' said George Catrambone, head of fixed income, Americas, at DWS, in an interview — adding that, right now, 10-year and 30-year Treasury securities clearly weren't favored as safety plays.
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That's a lesson learned since extreme market tumult erupted about two months ago, after President Donald Trump shocked markets on April 2 with his widespread 'liberation day' tariffs that were far higher than anticipated, Catrambone noted.
'Until proven otherwise, gold is the new alternative risk-free asset,' he said.
Gold, the U.S. dollar and Treasury securities have all long been staples that investors flocked to for safety during times of rising geopolitical tensions or market stress. That was, until this year.
Even before Trump's election in November, his tough talk on tariffs during the campaign had global investors flocking to gold as a way to diversify their reserves beyond the U.S. dollar.
Since April's tariff tumult, fears of a lasting 'sell America' trade have loomed over global markets, with the ICE U.S. Dollar Index DXY up 0.3% on Friday, but still 9.5% lower on the year so far.
Meanwhile, the most active contract for gold futures GC00 GCQ25 settled at a record $3,452.80 Friday, its 24th all-time high this year, according to Dow Jones Market Data.
Working against Treasurys has been a focus on the large U.S. government debt load, as well as recent fiscal deficit projections under the Republican tax-and-spending bill that's now in the hands of the Senate.
Interest payments on America's $36 trillion national debt cost more than $1 trillion per annum, according to a BofA Global Research team led by investment strategist Michael Hartnett.
What's more, interest payments will keep rising until the 5-year Treasury yield BX:TMUBMUSD05Y falls below 3.3% from its current 4% level, the BofA team wrote in a Friday client note.
That's why the Trump administration wants the Federal Reserve to cut interest rates quickly in the second half of this year, the BofA team noted.
The 10-year Treasury yield BX:TMUBMUSD10Y rose to 4.423% Friday, or 80 basis points above its one-year low, while the 30-year 'long bond' yield BX:TMUBMUSD30Y climbed to 4.913%, about 98 basis points above its lowest 12-month level, according to Dow Jones Market Data.
The BofA Global team pegged U.S. debt and deficits as the biggest factors driving the consensus 'short the long bond' trade on Wall Street.
Yet the selloff in the Treasury market has come amid a backdrop where investors have yet to face a prolonged risk-off period.
The S&P 500 index SPX ended Friday sharply lower, but was still almost 20% above its April 8 closing low, and only 2.7% off its 6,144.15 record closing high on Feb. 19, according to Dow Jones Market Data.
'I wouldn't throw the baby out with the bathwater,' Catrambone said. 'There's a point where gold is simply overvalued. That's why the trade doesn't hold up on a long-term basis.'
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Why bonds aren't acting like a safe haven for investors amid the Israel-Iran conflict