The unveiling of US President Donald Trump's reciprocal tariffs has sent shockwaves across all asset classes as threats posed by high tariff rates and trade tensions introduced greater uncertainty into the global economy, say pundits.
For example, US bonds experienced a large sell-off on the night of April 9 when new US tariffs took effect. There is speculation China might use its holdings of US government bonds as a strategic tool in the trade war.
Even gold, which typically benefits from risk-off sentiment, has seen recent pullbacks from US$3,244.09, its all-time high, during trading on April 11. The drop, according to analysts, occurred because tariffs caused a recent stock slump and investors sold gold to raise capital to make up for losses in assets such as stocks.
Markets generally react poorly to uncertainty, and when it's tied to fundamental pillars such as global trade and economic growth, the impact tends to be widespread across all asset classes, said Gulf Binance, the operator of Thailand's leading licensed cryptocurrency exchange Binance TH.
"We're witnessing a rare scenario where both risk assets and traditional safe havens such as bonds and US Treasuries are under pressure," Gulf Binance's chief executive Nirun Fuwattananukul told the Bangkok Post.
"Uncertainty at this scale erodes investor confidence, dampens global demand and tightens liquidity across markets. If the situation escalates into a full-blown trade war, we could see severe dislocations in currency markets. In such a scenario, real assets such as gold or digital assets like Bitcoin may emerge as strong long-term hedges against systemic risk."
BUYING THE DIPS
The price of Bitcoin slid below $100,000 after reaching the milestone following Trump's imposition of import tariffs on goods from China, Canada and Mexico, triggering immediate responses from the three countries. The world's most popular cryptocurrency by market capitalisation fell to as low as $74,500, before picking up in early April, now holding steady at more than $82,000 per coin.
"While Trump's pro-crypto stance was expected to lift sentiment, his broader economic policies, particularly the aggressive tariff measures, have had the opposite effect on global markets. The across-the-board tariffs are disrupting global trade, undermining global growth and shaking the foundations of the world economic order," said Mr Nirun.
This shift has profound implications for supply chains and international cooperation, and it raises the risk of a full-blown trade war, he said. In this environment, any positive policy signals for crypto are being outweighed by the much larger negative impact on the global economy, said Mr Nirun.
"A global recession would reduce liquidity and investment appetite across the board. When people have less money, there's naturally less capital flowing into risk assets, including cryptocurrencies," he said.
The economic uncertainty is affecting all investor segments. When there's a shock of this magnitude, both institutional and retail investors tend to reduce exposure to risk assets across the board, including Bitcoin, said Mr Nirun.
He said recent outflows from Bitcoin exchange-traded funds (ETFs) suggest the cryptocurrency, similar to traditional assets, is facing pressure. This highlights the increasing correlation between crypto and traditional financial markets, said Mr Nirun.
For those who believe Trump's tariff tactics are more of a short-term negotiation tool rather than a permanent policy shift, this market weakness could present an attractive buying opportunity for long-term, high-growth assets such as Bitcoin, he said.
There are recent signs that large investors dubbed whales are buying the dip, accumulating Bitcoin, which suggests there is still long-term confidence among sophisticated investors who see this price range as an attractive entry point, said Mr Nirun.
"While short-term demand may be soft due to macroeconomic headwinds, strategic accumulation by large players points to continued belief in Bitcoin's long-term value," he said.
GOLD TEMPTATION
According to the World Gold Council (WGC), bullion surpassed $3,000 an ounce on March 14 after posting more than 40 record highs last year and 14 more this year.
Gold's recent surge defied historical trends, reaching $3,000 in record time, with the latest $500-increment taking just 210 days. This was supported by a combination of geopolitical and geoeconomic uncertainty, rising inflation, lower rates and a weaker US dollar, said Shaokai Fan, head of Asia-Pacific excluding China and global head of central banks at WGC.
During the first week of April, gold was challenged by the US reciprocal tariffs that raised fears of slower growth, higher inflation and job losses.
Global stocks fell on April 7 as trade war fears grew in parallel with the dollar weakening, causing a broad equity market sell-off and a decline in oil prices.
"This triggered a wave of risk-off sentiment that led to a sharp decline in global equities and falling bond yields, as investors sought safe-haven assets. Amid the sell-off, gold showed resilience and remained steady," he told the Bangkok Post.
The LBMA Gold Price only dipped 0.6% to $3,054.5, maintaining a strong 17% year-to-date gain as of the first week of April, said Mr Fan.
Strong demand for gold from central banks continues, with global central bank gold reserves rising by 24 tonnes in February. Thus far, Poland, China, Turkey and the Czech Republic have led gold demand from emerging market central banks. In the preceding months, much of the buying was centred on those central banks.
Global gold ETF inflows continued in March, with positive demand across all regions.
After four monthly inflows in a row, the total assets under management of global gold ETFs reached another month-end peak of $345 billion and holdings rose 3% to 3,445 tonnes.
North American demand led global ETF flows for March, adding $6.5 billion and constituting 76% of total flows, notching $12.9 billion for the quarter.
First-quarter data indicated ETF flows in Europe reached $4.6 billion, marking the strongest quarter since the first quarter of 2020, said Mr Fan.
While higher prices may put pressure on jewellery demand, in some countries such as Thailand consumers may view the rally as an opportunity to invest in gold bars and coins, he said.
"Gold once again proved resilient during market turmoil," said Mr Fan. "While gold may face some consolidation, ongoing trade policy uncertainty will continue to weigh heavily on market sentiment, potentially providing tailwinds for gold investment demand."