Just 13 hours after massive tariffs came in to force an increased deleveraging marketplace event into Wednesday morning, President Trump almost entirely undid them to spark a stunning reversal.
The move by Trump triggered the fourth-best day on the S&P 500, fueled by the highest volume since 2008, while the Nasdaq jumped by 12% within just a few hours, prompting Goldman Sachs to reverse its recession forecast only 75 minutes after issuing it.
The Dow Jones Industrial Average jumped by almost 3,000 points on Wednesday, while the Nasdaq had its best day in 24 years, after President Donald Trump's 90-day pause on most reciprocal tariffs and a surprisingly strong Treasury auction.
However, this week's short-covering influenced whipsaw move was not a full reversal in stocks, nor in duties. China is one big exception with crippling 125% levies, and the base 10% tariffs remains in effect for at least 90 days in which the U.S. will negotiate with its allies.
The whipsaw moves in Gold Futures this week have been even more impressive, jumping over $250 between Monday’s lows and Friday morning’s high. This huge reversal included gold’s largest intraday jump in five years on Wednesday.
Technically, Gold Futures have recently exceeded the initial Cup & Handle breakout target of the psychologically important $3000 level, which is now attempting to become a floor as the safe-haven metal sets its sights on the logarithmic target of $4000.
Following a brief, 3-day 7% healthy correction in the gold price, the heightened tariffs on China, who have been major buyers of bullion, has kept geopolitical tensions elevated between the world’s two largest economies and taken Gold Futures to fresh all-time highs near $3250 as I type this column.
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately,” President Donald Trump announced on his Truth Social platform at 1:18 pm EDT on Wednesday.
“At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable,” he added.
Just ahead of the blistering short-covering rally on Wall Street, U.S. government bonds began a sharp selloff that has continued into Friday morning. U.S Treasuries are traditionally considered a safe place for investors to put their money in times of turmoil.
The recent chaos in the U.S. stock market has infected the bond market, fueling speculation about a potentially destabilizing shock to the global financial system. The sharp move higher in bond yields piled pressure on President Trump to announce the 90-day pause on most tariffs.
Among Wall Street executives, President Trump seemed keen to follow JPMorgan Chase CEO Jamie Dimon, who had said earlier Wednesday on the Fox Business’ "Mornings with Maria" program that his sweeping tariffs will probably lead to a recession and defaults by borrowers.
Dimon had previously warned that trade wars could have lasting negative consequences, days after he and other U.S. bank CEOs met with Commerce Secretary Howard Lutnick to discuss the administration's sweeping tariffs.
"The economy is facing considerable turbulence," Dimon wrote last week. "We are likely to see inflationary outcomes ... Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth."
President Trump subsequently backed off higher tariff levels for most countries, lifting some of the pressure on Treasury markets and triggering a jump in liquidity into the market.
The 10-year Treasury yield is a benchmark that directly influences borrowing costs for all U.S. consumers, and when it heads in the wrong direction, that has major implications for the U.S. economy.
Trump has made it one of his key priorities to lower yields on bond markets, the benchmark for government borrowing costs as well. U.S. Treasury Secretary Scott Bessent said in February that the president “wants lower rates,” adding “he and I are focused on the 10-year Treasury and what is the yield of that”.
Along with the ongoing geopolitical situations in Ukraine and the Middle East, worries about a global trade war and the potential for a U.S. and/or global economic recession are prompting increasing concerns about the U.S. Treasury market and its stability. Gold and U.S. Treasuries often compete for safe-haven status, with Treasuries historically winning when yields were higher.
However, with investors concerned about the stability of the U.S. government bond market, gold is providing an obvious alternative. When the Fed intervened in March 2020 with a 100 basis-point emergency rate cut, gold subsequently rallied over 30% the remainder of the year.
While equity markets have been attempting to stabilize since Trump’s tariff relief announcement mid-week, the recent selling in the U.S. bond market should be more concerning for investors as U.S. debt spirals out of control heading into a coming debt ceiling fight.
Currently, the U.S. has $36.7 trillion of debt outstanding with $28.9 trillion being held by the public. The remainder is held by government agencies such as Social Security and Medicare.
The U.S. could run out of cash by mid-May if Congress does not increase or suspend the debt limit with yet another postponement. The debt limit is currently $31.4 trillion and has been constantly suspended as policymakers continue to kick the debt can down a road that will inevitably end in a metropolis called Default.
Yet, every few months or so, another crisis develops and the worst case has been failure to agree that results in a continued dicey debt situation. U.S. federal debt is currently around 122% of GDP. Of the G7, the U.S. debt is the third highest, behind Japan and Italy. Anything over 100% is a distinct drag on the economy.
Importantly, this week’s bond collapse has increased marketplace concerns about the U.S. Treasury market and its stability. The U.S. has thrived because of the U.S. dollar being the world’s reserve currency, with central banks required to hold U.S. Treasuries.
Yet, America's move to freeze Russian dollar reserves in the wake of the Ukraine invasion has triggered a rush for Eastern central banks to sell U.S. Treasuries and boost their gold position.
With the U.S. dollar being challenged by the BRICS nations, central banks continue to buy gold as they develop an alternative to the global payments system SWIFT, along with alternatives to the IMF, World Bank, and other international agencies.
They understand that the U.S. government cannot continually run a now $2 trillion deficit indefinitely, and the Keynesian financial system will come crashing down when the line at the door to buy Treasuries no longer forms. Then we get a sovereign debt crisis and an inevitable default.
As the gold price moved above $3200 this morning, the USDX has dipped below the psychological 100 level for the first time since July 2023. Over the past month, the greenback has shed 3.48%, down 5.66% over the last year.
Precious metals prices had already exploded higher before Trump’s surprise Wednesday tariff announcement, with Gold Futures having risen over $110 on the Comex and silver moving up 4%, while the miners gained back all the previous margin call influenced losses.
After a brief trip through Whipsaw City with the stock market, gold stocks have become an island of safety in a sea of volatility. In fact, the GDX is trading at 13-year highs while vastly outperforming AI stocks, S&P 500, bonds, oil, and copper as the marketplace attempts to stabilize following a massive deleveraging event.
The Van Eck controlled GDX stated in its March report this week, that according to LSEG Lipper data, a surge in investor interest in the gold sector led to the largest monthly net inflows in more than a year for funds that invest in gold miners, reversing a trend of persistent net outflows over the last couple of years.
Both GDX and the higher-risk junior GDXJ has continued to show evidence of sector rotation by running up over 13% with strong volume so far this week, while the S&P 500 remains well below its 200-day moving average.
Precious metal sector bellwether Newmont Corp. (NEM) has formed a bullish 2.5-year inverse Head & Shoulders bottom and appears to be headed to the neckline at $55 soon.
The stock of the world’s largest and most liquid gold miner is on the verge of an epic rally from this large accumulative base, that could eventually bring the price back to the 2022 all-time high near $78 before year-end.
With Newmont also being the only gold stock in the S&P 500, the recent rise in volume indicates more generalist capital coming into the relatively tiny precious metals mining space.
Meanwhile, as the gold price continues to benefit from rising geopolitical tensions and fears over new U.S. tariffs, silver has stabilized after initially being hit hard with the stock market.
Yet, the Gold/Silver Ratio (GSR) remains over 100 after reaching 107 last week, which means that it still takes over 100 ounces of silver to equal the value of 1 ounce of gold.
The only other time this closely followed barometer reached triple digits was during the Covid-19 panic in March 2020, when the GSR spiked to an unprecedented 124. The historical average for the ratio is around 60 to 1.
The move proved to be an incredible buying opportunity in both silver and the still under-owned junior space, which saw the GDXJ move up nearly 350% in just 5-months from a spike low at $18.
With gold stocks breaking out of a huge accumulative 4-year base, the beaten down and left for dead in 2024 mining sector is in the process of a 2025 mean reversion, with many quality juniors still trading at low-risk entry points.
At Junior Miner Junky (JMJ), my over two decades of experience in the mining space has the JMJ real-money portfolio up 40% in 2025. After loading this highly leveraged junior portfolio with 20 quality small-cap gold, copper, and silver related stocks, several are breaking out to multi-year highs with the sector, with others just beginning to catch up.
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