Author: Anthony J. Pompliano, Founder and CEO of Professional Capital Management; Translation: Shaw Gold Finance
Gold, bonds, and Bitcoin are reflecting the true current state of the financial markets. Recently, we saw gold prices plummet to $4,100 per ounce, bond prices continue to rise, and Bitcoin has gained about 8% since the outbreak of conflict.
So, why is all this happening? What do these three asset classes signal about the future?
Let’s start with bonds. Over the years, trillions of dollars have flowed into the U.S. Treasury market. U.S. Treasuries are highly attractive to investors due to their high liquidity, near-zero credit risk, predictable returns, and tax advantages at the state and local levels. Typically, during times of increased uncertainty, safe-haven demand drives up bond prices and pushes yields down.
This demand stems from investors wanting to avoid significant losses in stocks and corporate bonds. The U.S. government is widely regarded as the ultimate safety net in financial markets, making Treasuries the lowest-risk assets.
However, during the Iran conflict, the market moved in the opposite direction: bond yields rose, prices fell. The reason: a sharp surge in oil prices, bringing typical stagflation risks. Stagflation fears prevent the Fed from cutting interest rates, and inflation concerns resurface. These inflation worries alter investor logic, discouraging them from pushing bond prices higher and yields lower.
Since February 28, U.S. Treasuries have been among the worst-performing major assets, contrary to conventional market logic.
But what if this abnormal bond market behavior is also accompanied by a rare extreme threat? What if buying U.S. Treasuries could invite missile attacks?
This is not hypothetical. Last night, Iran’s parliamentary speaker posted a strongly worded tweet:
“All financial entities funding the U.S. military budget, except for military bases, are legitimate targets. U.S. Treasuries are soaked in the blood of the Iranian people. Buying these bonds is like inviting strikes on your headquarters and assets.
We are monitoring your portfolios. This is the final warning.”
How serious is this threat? I can’t judge. But the idea that financial institutions could become targets in a direct military conflict with the U.S. is unsettling. Will this statement scare people away from buying U.S. Treasuries? Probably not. But history has seen stranger things happen.
This latest threat is just another example of Iran’s ongoing strategy amid current conflicts. They continue launching missiles and drones at U.S. military bases and energy facilities in several Middle Eastern countries, block the Strait of Hormuz, and have attacked ships attempting to traverse these dangerous waters. This weekend, Iran also threatened to cut undersea internet cables in the strait.
This strategy reminds me of a long-standing Reddit post explaining why you should never confront a person who has lost their mind: “Never argue or conflict with unpredictable, mentally unstable, or unreasonable people. They often have no restraint, will use ‘despicable’ tactics, and drag you down to their level, where you’ll suffer regardless of the outcome. They’re more dangerous because they’re unpredictable and fearless.”
This unpredictability, combined with their intent to cause maximum destruction, puts the U.S. in an extraordinary situation. We could stop bombing the country and declare victory at any time, but we cannot guarantee Iran will cease attacking neighbors or abandon nuclear development.
In such times of heightened uncertainty, gold prices should normally rise rapidly. Investors tend to flock to safe assets and hedge against currency devaluation caused by war financing. But in this conflict, that’s not happening.
Gold has plummeted about 13% since the conflict began. Some attribute this sell-off to the Fed possibly raising interest rates, but I disagree. I believe the real issue is that individuals, institutions, and countries in the East are facing a liquidity crisis.
These groups have heavily bought gold over the past two years. Therefore, against a backdrop of a strengthening dollar, these gold holders are likely selling to raise cash — the easiest way to do so.
This brings us to Bitcoin. This cryptocurrency has emerged as an overlooked winner in this conflict. Ash Crypto reports: “Since the outbreak of the U.S.-Iran conflict 23 days ago, Bitcoin has outperformed gold by 34%.”
This strong performance is driven by multiple factors, but I genuinely believe the world is realizing Bitcoin’s appeal as a non-sovereign, decentralized store of value — capable of transferring across the globe in seconds. In the future we are entering, a means of storing value that doesn’t rely on air freight is highly attractive.
Therefore, before this war ends, my prediction is: oil prices will continue to rise, bonds and gold will remain under pressure, and Bitcoin will outperform other stores of value. This may not be what investors expected before the conflict, but reality has already proven otherwise. Market theories in textbooks don’t change real markets.
Remember this: Once the Iran conflict ends, financial markets will likely rebound sharply. Last Friday evening, President Trump told reporters that the U.S. is about to wind down the conflict. As soon as that news broke, stocks surged almost instantly in after-hours trading — a clear sign.
So, investors are now playing a game of nerve. How much drawdown are we willing to endure to bet on a ceasefire by the Trump administration? We all know that positioning correctly when the tide turns can yield huge rewards, but timing the market precisely is nearly impossible. That means you either accept a portfolio drawdown or stay on the sidelines, risking missing the rebound.
Every investor has their own strategy. But one thing is certain… the movement of financial assets is being driven by Middle Eastern bombs, domestic oil prices, and White House tweets. Living in this era is truly remarkable.
