Gold has surged to record highs fueled by rising geopolitical tensions, such as Iran-Israel tensions, and a sharp loss of confidence in traditional U.S. safe havens. Historically, investors turned to U.S. Treasuries and the dollar during times of crisis. But this time, these assets are also under pressure.
A rare trifecta of weakness — declines in U.S. stocks, bonds and the dollar — signaled a broader shift in sentiment in April amid Trump tariff tensions. Policy uncertainty, inflation risks, and concerns about U.S. leadership have pushed investors to rethink their strategies.
The gold bullion ETF SPDR Gold Trust GLD has gained 27% so far this year (as of June 16, 2025). The U.S. dollar ETF Invesco DB US Dollar Index Bullish Fund UUP has retreated 8.3% in the year-to-date frame (as of June 16, 2025). iShares 20+ Year Treasury Bond ETF TLT has lost about 2.4% so far this year.
A sharp rise in U.S. policy uncertainty has unsettled investors. Meanwhile, the U.S. dollar, long considered overvalued, is starting to unwind. Forecasts point to a potential 10-20% decline against major currencies like the euro and yen over the medium term. The narrowing yield gap between the United States and other major economies is further weakening the dollar’s appeal.
Note that Moody’s downgraded the U.S. sovereign credit rating by one notch in May 2025, citing concerns over the country’s ballooning $36 trillion debt burden. This move, following similar actions by Fitch in 2023 and S&P in 2011, raised alarm among investors about the nation’s long-term fiscal sustainability.
The downgrade has veered the market’s focus toward Washington’s fiscal policy debates. This is especially true since a major tax cut bill backed by President Donald Trump may raise the fiscal deficit (read: ETFs to Play Amid Long-Term Yields’ Best Week Since 1982).
However, many analysts believe that the debt downgrade could eventually lead to higher borrowing costs for both public and private entities. The value of U.S. treasuries is likely to decline as the bond prices and yields are inversely related.
With both Treasuries and the dollar underperforming, investors are turning to gold as a more reliable store of value. Unlike financial instruments tied to government or central bank actions, gold holds intrinsic value and is immune to inflation or political instability.