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US stocks rallied on Tuesday as hopes for a de-escalation in the US-China trade war lifted investor sentiment after a sharp selloff the previous day. The S&P 500 and Nasdaq each climbed 2.5%, the Dow Jones surged 1016 points. Optimism stemmed from Treasury Secretary Bessent’s comments at a JPMorgan-hosted summit, where he said the current tariff standoff is “unsustainable” and signalled that negotiations with China would move toward resolution. However, gains eased later in the day as Bessent acknowledged that formal talks had not yet begun and warned negotiations would likely be a “slog.”

Meanwhile, fresh concerns lingered over President Trump’s attacks on Fed Chair Jerome Powell, which contributed to recent market volatility. Tech stocks led the rebound, shares of Tesla rose 4.6% ahead of its earnings release, though the company remains down 40% year-to-date. On the earnings front, General Electric jumped 6.1% after results, while Verizon underperformed after posting earnings.

Similar to yesterday, Tuesday’s big moves in stocks came amid lighter-than-usual trading, a backdrop that sometimes exacerbates swings.

A volley of tariff-related headlines during Tuesday’s session continued to fuel market moves as fast-twitch investors pour over news reports for clues on how to trade the crisis. White House Press Secretary Karoline Leavitt, in a news briefing, said that progress is being made on trade deals and that the “ball is moving in the right direction with China.” Earlier, stocks had pushed even higher following reports of closed-door comments by Treasury Secretary Scott Bessent saying the tariff standoff with China is unsustainable and that he expects the situation to de-escalate. Bessent’s comments came against the backdrop of the International Monetary Fund sharply lowering its forecasts for world growth this year and next, along with warning that the outlook could worsen because of the trade war.

Gold futures have shattered records, soaring to $3,400/oz with a 25% YTD gain, as U.S.-China trade fears and a declining share of U.S. debt held overseas drive investors to safety—central banks alone added 300 tons in 2024, the most since 2012. Yet, with volatility spiking and liquidity risks looming, is a correction on the horizon? Gold futures have decisively broken prior records, surging past $3,400 per ounce and extending year-to-date gains beyond 25% as escalating

Recent events, such as major corporate warnings (e.g., Nvidia’s $5B potential hit), act as potent catalysts, accelerating the flight to perceived safety and driving gold significantly higher. This rally reflects a fundamental shift in investor sentiment and positioning, evidenced by Bank of America’s latest survey identifying “long gold” as the most crowded trade (49% respondents)—a title held by tech stocks for two years prior. This conviction is substantiated by robust and sustained inflows into global Gold ETFs since Q1, indicating broad-based demand as investors actively seek portfolio protection.

A powerful, structural tailwind for gold comes from consistent net purchases by global central banks, especially within emerging markets seeking to diversify reserves beyond the US dollar and insulate against geopolitical shocks. Steady accumulation by countries like China and notable increases elsewhere (e.g., Poland’s +90 tons in 2024) underscore gold’s re-emerging role as a core reserve asset, providing a solid demand floor.

Institutional investors are increasingly adopting this view, allocating strategically to gold as a vital hedge against persistent inflation, geopolitical flare-ups, and potential weakness in traditional financial assets. This shift is driven by factors like low or negative real interest rates, which reduce the opportunity cost of holding non-yielding gold, making it a compelling diversifier in current portfolios.

The confluence of enduring geopolitical uncertainty, ongoing central bank demand for diversification, and investors actively seeking portfolio insurance paints a constructive backdrop for gold. With global allocations to gold still arguably below historical peaks (e.g., US Gold ETF AUM ~1.6% vs. 7.6% in 2011) and many anticipating it as a top 2025 performer (42% in BofA survey), the strategic case for holding gold appears intact.

Despite the bullish narrative, potential risks loom. Extreme price appreciation could eventually stifle demand or incite large-scale profit-taking. Moreover, a severe financial market liquidity squeeze—a growing concern amidst heightened volatility—could force distressed selling of liquid assets, including gold, regardless of fundamentals. A significant de-escalation in global trade tensions would also naturally reduce its immediate safe-haven appeal.

For the week:

· Tesla Q1 Earnings Report (Apr 22): Vehicle deliveries declined in Q1 2025, with tariffs halting key component shipments from China to the U.S., potentially eroding gross margins. Focus will be on how Trump’s reciprocal tariff policies impact operations and profitability.

· Eurozone Flash PMI (Apr 23): Manufacturing PMI expected to slip to 47.1 (prev. 48.6), services to 50.3 (prev. 51.0), and composite at 50.3 (prev. 50.9). Amid tariff uncertainty, a weaker report could signal a sharper slowdown, potentially cementing a 70%-priced ECB rate cut in June and pressuring the euro.

· U.S. Housing Market Data (Apr 23-24): March new home sales forecast at 683,000 (prev. 676,000) and existing home sales at 4.13 million (prev. 4.26 million). Despite tariff disruptions, housing resilience supports economic stability, though a miss could dampen sentiment.

· Alphabet Q1 Earnings Report (Apr 24): Rising data center investment costs pose risks, with markets eyeing signals on AI capital expenditures. Tariff impacts on operations will also be key, as policy uncertainty weighs on tech sector outlook.