Bonds Failing to Gold?

For decades, long-term US Treasury bonds have been seen as the market’s go-to safe haven. But 2025 has potentially thrown that playbook out the window. Instead of offering shelter from the storm, bonds have been tumbling alongside stocks and leaving many investors exposed just when they thought they were hedged.

What’s changed? A mix of stubborn inflation, renewed tariff battles, and growing worries about the US government’s balance sheet. With both bonds and equities under pressure, traders and institutions are shifting gears and are now looking toward gold and oil as their new hedging tools.

Bonds No Longer a Guarantee?

Usually, when stocks drop, bonds rise. It’s been one of the most reliable dynamics in investing for years. But this year, that relationship has flipped. Bonds aren’t just failing to cushion portfolios; they’re falling right alongside risk assets.

One major factor is the return of aggressive tariffs under the Trump administration. These trade moves have stirred up inflation fears again and put pressure on supply chains. Higher inflation eats away at fixed returns, making long-term bonds a much tougher sell.

Then there’s the debt issue. The US government is running large deficits, and investors are getting nervous. With Treasury yields creeping higher, especially on the 10-year note, it’s clear the bond market is demanding more return to take on what’s starting to feel like a growing credit risk.

Goldman's Call: Commodities Are Back

As traditional hedges fail to perform, big names like Goldman Sachs are pointing to alternatives. The firm has laid out a bullish forecast for gold, predicting prices could hit US$3,700 an ounce before the year wraps up. If economic pressures persist or worsen, they expect to see US$4,000 by mid-2026.

Why gold? It’s the classic fallback during periods of financial stress and currency uncertainty. And as we always mention, central banks are backing that trend. In April, China’s central bank added another 2 tonnes to its reserves, which now include about 7% gold. That move, shared widely on social media, suggests major institutions are preparing for more volatility ahead.

Oil is getting similar attention. With tariffs disrupting global trade and tensions bubbling in key producing regions, energy markets are tight. That kind of pressure makes oil futures more attractive, not just as a bet on rising prices, but as protection against inflation tied to supply shocks.

Government Promise VS a Natural Element

Bonds have two major problems now: First, inflation is still a problem. And when inflation rises, the real return on fixed-income assets drops (unless yields shoot up to compensate, which pushes bond prices down). That’s exactly what’s been happening.

Second, the US is staring down a massive debt pile, and there’s no political consensus on how to rein it in. That’s created a sense of unease in markets. Investors are starting to question whether Treasuries can keep their “risk-free” status if the government can’t get its fiscal house in order.

With the traditional 60/40 portfolio under strain, more investors are rethinking their strategies. It shouldn’t be a surprise that a natural element is gaining confidence over a promise from a temporary government. It is surprising to see how long it has taken for this consensus to start shifting.