Gold, Bonds, and Bitcoin: The Three Truth Tellers of Financial Markets

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To investors, Gold, bonds, and bitcoin tell the story of financial markets right now. We recently saw gold crash down to $4,100 per ounce, bonds continue pushing higher, and bitcoin is up around 8% since the start of the war. So why is all of this happening? What are these three assets telling us about what is likely to come next? We can start with bonds. Trillions of dollars have poured into US Treasuries over the years. Investors find the bonds attractive due to their deep liquidity, near zero credit risk, predictable income, and tax advantages at the state and local level. Normally during times of uncertainty, Treasury prices appreciate and yields are pressured lower due to increased demand. That demand comes from investors seeking refuge from large potential losses in stocks and corporate bonds. The US government is largely seen as the ultimate backstop in financial markets, so the government’s bonds are deemed the least risky thing to own. But we have seen the opposite happen during the Iran conflict. Yields are up and Treasuries are down. This is because oil prices have spiked hard, which introduces classic stagflation risk. That stagflation risk deters the Fed from cutting interest rates and it reignites inflation fears. Those inflation fears change the calculus for investors and prevent them from driving yields down and Treasuries up. Treasuries have actually been one of the worst-performing major assets since February 28th, which is the exact opposite of the usual playbook. But what if this weird reaction in the bond market was met with a once-in-a-lifetime threat for participating? What if you could have a missile shot at you for buying Treasuries? This isn’t a hypothetical situation. Last night, the Speaker of the Islamic Republic of Iran’s Parliament put out an unhinged tweet that read: “Alongside military bases, those financial entities that finance the US military budget are legitimate targets. US treasury bonds are soaked in Iranians’ blood. Purchase them, and you purchase a strike on your HQ and assets. We monitor your portfolios. This is your final notice.” How serious is this threat? I have no idea. But the idea that financial institutions could potentially become targets of a country that the United States is actively engaged in kinetic combat with is unsettling. Will this proclamation deter people from buying Treasuries? Probably not. But weirder things have happened in the past. This latest threat is just another example of Iran’s strategy to deal with the current conflict. They have been launching missiles and drones into American military bases, along with energy infrastructure of various neighboring countries in the Middle East. They have shut down the Strait of Hormuz and attacked multiple ships that tried to navigate the perilous waters. And this weekend the largest state sponsor of terrorism threatened to cut the sub-sea internet cables in the Strait. This strategy reminds me of an old Reddit post that explains why you never want to fight an insane person: “Never fight or argue with an unpredictable, mentally unstable, or irrational person, as they often lack restraint, use “dirty” tactics, and will drag you down to their level, resulting in a loss regardless of the outcome. They pose a higher danger because they are unpredictable and lack fear.” 🚨 Crypto Portfolio Strategies & Investing for the Fourth Turning I am hosting a webinar with Abra this Thursday @ 3pm ET where we will break down everything investors need to know about custody, leverage, and portfolio positioning in today’s evolving crypto market. Abra’s CEO Bill Barhydt and Managing Director Marissa Kim will join me to discuss how serious investors are thinking about risk, opportunity, and long-term strategy during this current market cycle. If you are an investor looking to better understand how to structure your crypto portfolio and navigate macro uncertainty, this webinar is for you. Register Here This lack of predictability, coupled with a desire to maximize damage inflicted, has put the United States in an unusual situation. We can stop bombing the country and claim victory at any point. There is no promise that Iran would stop attacking their neighbors, stop funding terrorism globally, or cease their pursuit of a nuclear weapon. During times of uncertainty like this, we would expect to see gold’s price appreciate rapidly. Investors tend to seek safe-haven assets and they want to insulate themselves from incoming currency debasement needed to fund a war. But that is not what has happened in this conflict. Gold has been plummeting and the precious metal is now down about 13% since the start of the war. Some people will claim the sell-off is due to potential Federal Reserve interest rate hikes, but I don’t think that is correct. I am more convinced that a liquidity crisis is underway for people, organizations, and countries in the Eastern world. These are the same groups that were aggressively buying gold in the last two years. So against the backdrop of a strengthening dollar, these gold holders are likely looking for liquidity and selling gold is an easy way to raise cash. This brings us to bitcoin. The digital currency has been the unsung hero of the conflict. Ash Crypto shows that “Bitcoin is up 34% against gold since the US-Iran war started 23 days ago.” There are multiple drivers of this outperformance, but I truly believe the world is recognizing bitcoin’s attractive attributes as a non-sovereign, decentralized asset that can be moved anywhere in the world within seconds. A store of value that doesn’t require an airplane to move it is quite attractive in the world we are headed towards. So until the war ends, my expectation is oil goes higher, bonds and gold stay under constant pressure, and bitcoin outperforms other store of value assets. This may not be what investors expected going into the conflict, but here we are. Your academic textbook can’t change reality. Remember, we know financial markets will rip higher immediately if the Iran war comes to an end. We know this because President Trump told reporters late on Friday that America was close to winding down the war. Stocks went green almost immediately in after-hours trading. So investors are all playing a game of chicken right now. How much pain are we willing to withstand on the hopes that Trump and his administration are close to a cease-fire? We know it will be valuable to be invested when the pivot comes, but it is nearly impossible to get the timing right. This means you have to eat the drawdown in your portfolio or you have to be out of the market and risk missing the fast recovery. Every investor has a different strategy. But one thing is clear…financial assets are responding to bombs in the Middle East, oil prices domestically, and what the man in the White House tweets. What a time to be alive. Hope everyone has a great start to their week. I will talk to you next time. - Anthony J. Pompliano Founder & CEO, Professional Capital Management Why Bitcoin Could Explode As Global Markets Crack Jordi Visser is a veteran macro investor with 30+ years of experience and the author of the VisserLabs Substack . In this conversation, we discuss rising geopolitical tensions, higher oil prices, and growing risks in private credit and global markets. We also explore bitcoin’s resilience, how AI is disrupting software and jobs, and why Jordy believes commodities, liquidity, and volatility will shape the next major investment cycle. 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