Gold Hits $5K — What’s the Market Afraid Of?
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
Ed Elson explores how markets are reacting to President Trump's latest geopolitical maneuvers, including his "taco" on Greenland tariffs and threats to Canada, while diving deep into gold's historic rally to $5,000 per ounce. (01:39) The episode features insights from Robert Armstrong on Trump's unpredictable trade policies and their market implications, followed by Reed Albergotti's breakdown of TikTok's finalized deal with Oracle and Silver Lake. Ed concludes with a critical analysis of gold's meteoric rise, questioning whether investors are chasing fundamentals or simply following a narrative-driven bubble.
- Main Theme: Market reactions to political uncertainty, focusing on Trump's trade policies, gold's record surge, and TikTok's ownership restructuring amid ongoing geopolitical tensions.
Speakers
Ed Elson
Ed is the host of Prof G Markets and author of a weekly markets newsletter. He provides sharp analysis on market trends, geopolitical events, and investment strategies for ambitious professionals seeking market insights.
Robert Armstrong
Rob is the author of the Unhedged newsletter and co-host of the Unhedged podcast. He's a respected financial journalist known for coining the term "taco" (referring to policy reversals) and provides regular market commentary with a focus on practical investment insights.
Reed Albergotti
Reed is the technology editor at Semafor and broke the news about TikTok's deal closure. He specializes in covering major tech deals, regulatory issues, and the intersection of technology and geopolitics.
Key Takeaways
Market Resilience to Trump's Erratic Announcements
Robert Armstrong observes that markets are showing diminished reactions to Trump's wild policy announcements, with the S&P only down a couple percent and the dollar weakening by about 1% during his Greenland saber-rattling. (03:27) This suggests investors are becoming more adept at distinguishing between genuine policy proposals and political theater. The key insight is that markets may be developing better filtering mechanisms for presidential social media posts versus actual policy implementation, though Armstrong warns that Trump's risk appetite may be increasing as a lame-duck president.
Distinguish Between Truth Social Posts and Real Policy
Armstrong suggests investors might benefit from essentially ignoring Trump's Truth Social account and focusing only on policies that have broader administrative support. (06:05) He notes the importance of identifying when multiple officials echo a policy versus when it's just a presidential outburst. This framework could help investors avoid whiplash from constant policy reversals while still paying attention to substantive changes that actually affect markets and business operations.
Gold's Rally Reflects Multiple Competing Theories
Despite being consistently wrong about gold's trajectory, Armstrong identifies three theories for its 50% surge: the debasement trade (dollar weakness and inflation), political instability hedging, and meme stock behavior. (09:03) However, he questions the debasement theory since bond markets show stable inflation expectations, and political instability isn't reflected in sovereign bond yields elsewhere. This suggests the rally might be more momentum-driven than fundamentally justified, highlighting the importance of questioning popular investment narratives.
TikTok's Algorithm Will Be Retrained for US Users
Reed Albergotti explains that Oracle will oversee the retraining of TikTok's algorithm specifically for US users, allowing them to detect any potential manipulation from the Chinese government. (21:51) While this addresses national security concerns technically, perception remains reality—critics argue that unless there's a complete break from China, manipulation risks persist. This demonstrates how regulatory solutions in tech often face ongoing scrutiny regardless of technical safeguards implemented.
Question Gold's Narrative-Driven Investment Thesis
Ed Elson challenges the automatic assumption that gold is the best crisis hedge, asking why investors don't consider other hard assets like copper, lithium, international stocks, or even defense contractors during uncertain times. (30:25) He argues that gold's current rally may be more about investors following a familiar story ("when things get bad, buy gold") rather than genuine fundamental analysis. This highlights the critical importance of developing independent investment theses rather than following crowd psychology, especially when prices become disconnected from underlying value propositions.
Statistics & Facts
- Gold hit $5,000 per Troy ounce for the first time ever, representing a surge of more than 50% over the past six months and more than 80% in the past twelve months. (02:09)
- Under the TikTok deal, ByteDance's ownership will fall to 20% of the US business, with Oracle, Silver Lake, and Abu Dhabi-based MGX each taking 15% stakes. (20:24)
- Alex Honnold was reportedly paid roughly $500,000 to free climb a 1,600-foot tower in Taiwan, which Ed Elson jokes makes it "the lowest ROI decision in history" on a risk-adjusted basis. (00:48)
