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

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 yields and prices move inversely—while spot gold surged past the $5,200 level, reaching its highest since January 30. In addition to tariff concerns, fears triggered by AI disruption fears and worries over potential U.S. military strikes on Iran further strengthened the upward momentum of these safe-haven assets.

JPMorgan Portfolio Manager Priya Misra said, “The recent increase in trade uncertainty over the past few days has led to risk-averse behavior in equities and safe-haven buying of 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—an across-the-board 15% tariff.

Last Friday, the Supreme Court ruled 6-3 that tariffs imposed by Trump under the International Emergency Economic Powers Act exceeded presidential authority. Trump strongly condemned the decision and subsequently threatened to impose a temporary 15% tariff on all imports—despite the U.S. having reached agreements with numerous trading partners.

Notably, the safe-haven sentiment triggered by new trade tariffs at least temporarily overshadowed a major concern in the Treasury market late last week—that the government might need to issue more debt to offset revenue losses or to refund part of the $170 billion in tariffs already collected.

Gennadiy Goldberg, head of U.S. rates 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. However, since refunds could take a long time and current tariff revenues have actually increased, these factors have collectively eased some worries in the fixed income market.

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

On Monday, a research report from Citrini Research, dated June 2028, and new use cases for Anthropic AI products, intensified concerns about AI disrupting traditional business models. Particularly, the scenario hypothesized for 2028—large-scale layoffs of white-collar workers, software-related loan defaults, and economic contraction—directly contributed to declines in delivery, payments, and software stocks.

“Two questions about AI are: how high will its costs be? which sectors will be impacted?” said Tom Hainlin, U.S. Bank Wealth Management investment strategist. “People are already reacting to 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, 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 a long-standing dispute over Iran’s nuclear program cannot be resolved, “very bad things will happen.” Iran has threatened 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 Societe Generale, said, “In my view, the key factors are geopolitical risks, Iran’s uncertain situation, and the uncertainty ahead of the State of the Union speech. Despite relatively strong economic data, multiple uncertainties are rising.”

From the trend perspective, 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% mark.

In terms of rate expectations, although traders largely dismiss the possibility of a rate cut at the Federal Reserve’s upcoming meeting, U.S. interest rate futures on Monday reflected nearly 60 basis points of easing this year—equivalent to two 25-basis-point cuts—above 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 predictions experienced a rollercoaster over the weekend. He summarized that, although 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 trading to pick up this week, which could lead to a significant rise in gold prices.”