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The global economy is on edge, with trade wars escalating and financial markets bracing for impact. As tensions rise, gold is shining brighter than ever as a safe-haven asset, and Japan’s bond market could be the spark that ignites a broader financial crisis.
At True Gold Republic, we believe understanding these dynamics is crucial for investors looking to protect and grow their wealth. Let’s dive into how trade wars are driving gold prices higher and why Japan’s economic shifts could trigger a global market meltdown.
The past year has seen trade wars intensify, particularly between the U.S. and China, with ripple effects across the globe. U.S. tariffs on Chinese goods, followed by retaliatory tariffs from China, have disrupted supply chains, stoked inflation fears, and heightened economic uncertainty. President Donald Trump’s aggressive tariff policies, including threats of 20% levies on most U.S. imports, have amplified market volatility, with global equity markets like the S&P 500 entering correction territory earlier this year.
In times of economic and geopolitical turmoil, investors flock to gold as a hedge against uncertainty. Gold prices have already hit record highs in 2025, with futures reaching $3,226 per ounce in April, driven by trade war anxieties and fears of stagflation—a toxic mix of slowing growth and rising inflation. Paul Wong, a market strategist at Sprott Asset Management, noted that “persistent tariffs and policy unpredictability continue to elevate the risk of stagflation, further increasing the demand for gold as the best safe-haven asset.”
Central banks are also bolstering gold’s bullish outlook. As U.S. fiscal policies raise concerns about the dollar’s reserve currency status, central banks have been increasing gold reserves while reducing holdings of U.S. Treasuries. This shift reflects growing distrust in U.S. debt sustainability, especially as tariffs could exacerbate inflation and complicate the Federal Reserve’s ability to cut rates. Wasif Latif of Sarmaya Partners highlighted that “rising inflation, elevated geopolitical tensions, and fiscal risks” are key drivers behind gold’s rally, predicting sustained demand for the yellow metal.
Gold’s appeal is further enhanced by its low volatility compared to equities. In April 2025, gold’s 30-day volatility was less than half that of the S&P 500, making it an ideal portfolio diversifier during market stress. With trade wars showing no signs of abating—Trump has signaled tariffs could extend to all countries, not just China—gold prices could climb even higher, potentially testing $3,500 per ounce by year-end if recession fears materialize.
While trade wars dominate headlines, a less-noticed but equally dangerous development is brewing in Japan. The Japanese government bond (JGB) market is experiencing a historic yield surge, with 10-year JGB yields reaching their highest levels since October 2008. Albert Edwards, chief global strategist at Société Générale, has warned that this spike could trigger a “global financial market Armageddon” by disrupting the yen carry trade and destabilizing markets worldwide.
For decades, Japan’s ultralow interest rates made the yen a favorite for carry trades, where investors borrow cheaply in yen to invest in higher-yielding assets abroad, particularly in U.S. equities and Treasuries. However, the Bank of Japan (BoJ) has shifted gears, raising its policy rate to 0.5% in January 2025 and pulling back on bond market support as inflation remains sticky. This policy shift, combined with foreign investors dominating JGB purchases, is driving yields higher, enticing Japanese investors to repatriate funds.
Edwards cautions that an unwinding of the yen carry trade could cause a “loud sucking sound” in U.S. financial markets, as Japanese capital flows reverse. U.S. equity and Treasury markets, inflated by Japanese investments, are particularly vulnerable. The Nikkei 225 plummeted nearly 3% in April 2025 amid trade war fears, and further yield spikes could exacerbate global market volatility. Japan’s history as a financial bellwether—evident in the late-1990s tech bubble burst—suggests its bond market turmoil could foreshadow broader chaos.
If Japan’s bond market triggers a global financial crisis, gold’s role as a store of wealth becomes even more critical. Historically, gold has outperformed during recessions and market stress, as seen during the 2008 Global Financial Crisis and the 2020 COVID-19 pandemic. In Japan specifically, gold priced in yen has delivered a stunning 40% return in 2024 and continues to outperform local assets in 2025.
A collapsing yen carry trade could weaken the U.S. dollar, further boosting gold’s appeal as a hedge against currency depreciation. Moreover, if U.S. markets falter due to reduced Japanese investment, safe-haven flows into gold will likely intensify. The World Gold Council emphasizes gold’s ability to reduce portfolio risk and provide liquidity during market turmoil, making it a strategic asset for Japanese and global investors alike.
At True Gold Republic, we see the convergence of trade wars and Japan’s bond market turmoil as a compelling case for gold. Here’s how investors can position themselves:
Increase Gold Exposure: Allocate a portion of your portfolio to physical gold or gold-backed ETFs to hedge against market volatility and inflation. Gold’s low correlation with equities makes it an effective diversifier.
Monitor Japan’s Bond Yields: Keep a close eye on JGB yields and BoJ policy moves, as further rate hikes could accelerate the yen carry trade unwind, impacting global markets.
Diversify Globally: While U.S. markets face risks, regions like Europe may benefit from redirected trade flows and lower input costs due to China’s export surplus. Consider selective exposure to resilient sectors like healthcare and technology.
Stay Informed: Trade wars and financial market dynamics evolve rapidly. Stay updated with True Gold Republic’s insights to navigate these turbulent times.
The trade wars raging across the globe are pushing gold prices to new heights, as investors seek safety amid economic and geopolitical uncertainty. Meanwhile, Japan’s surging bond yields threaten to unravel the yen carry trade, potentially triggering a global financial market Armageddon that could dwarf the current volatility. For investors, gold remains a beacon of stability in this storm, offering protection and potential upside. At True Gold Republic, we’re committed to helping you harness gold’s power to safeguard your wealth. Stay vigilant, stay diversified, and let gold be your anchor in these uncertain times.
Disclaimer: This blog post is for informational purposes only and does not constitute investment advice. Consult a financial advisor before making investment decisions.
Sources:
Business Insider, “A famed Wall Street bear warns of ‘global financial market Armageddon’ as Japanese bond yields spike”
Seeking Alpha, “Japan could trigger a ‘global financial market Armageddon’ – SG”
Reuters, “Gold hits record high as investors flock to safe-haven amid tariff war”
CNBC, “Japan stocks fall nearly 3% amid mixed Asia-Pacific trading as U.S.-China trade war worries mount”
ICG, “Trade War Views: Implications for the Economic Outlook and Business Operating Environment”
Reuters, “Stocks sink with S&P 500 in correction, bonds in demand amid tariff angst”
Reuters, “Stocks lose ground amid inflation concerns, trade war worries”
Euronews, “Gold reaches a new milestone as global trade war escalates”
Reuters, “Stocks drop, gold hits record as tariffs stoke recession worries”
SSGA, “Why Gold May Shine in a Trade War Regime”
World Gold Council, “Inflation, yields and portfolios in Japan: Adapting to changes”
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