The "anti-dollar" storm sweeps the market, is gold brewing a new round of offensive?

According to the Zhitong Finance APP, Moody's, one of the three major international credit rating agencies, has downgraded the U.S. government's credit rating from the highest rating of Aaa to Aa1, meaning that U.S. sovereign debt has been completely removed from the "highest credit rating" category by all three rating agencies, and gold has once again become the preferred "safe haven" for investors. Steve Sosnick, the chief strategist at Interactive Brokers, a top U.S. brokerage, recently stated in an interview that gold is not only a very important crisis hedging tool for U.S. investors but is also recognized as the most core "anti-dollar" asset in the global financial market.

Although the U.S. dollar index rebounded after easing tensions in U.S.-China trade relations, an increasing number of Wall Street investment institutions have indicated that this rebound is merely temporary and have emphasized that a potential "dollar bear market" that could last for years has just begun, triggered by the chaotic and disorderly "U.S. economic transformation actions" of the Trump administration that disrupt the global trading system.

Meanwhile, as the dollar may enter a prolonged bear market, Goldman Sachs and other Wall Street financial giants are generally optimistic about the rise in gold prices. Following Moody's downgrade of the U.S. rating, gold prices rose on Monday after experiencing the largest weekly decline since November, and since Trump's return to the White House, it has become the "preferred alternative" for dollar-denominated investments in the expectations of an increasing number of investors.

"In many cases, I think of gold not so much as a crisis hedging tool—if you live in a country that cannot repay debts with sovereign currency, it is indeed a crisis hedge—but rather in the U.S. market, it is more like an 'anti-dollar' asset," Sosnick stated in a media interview.

He also emphasized that the design of the global economic system favors those who hold tangible assets such as real estate and stocks, and these tangible assets, including gold, can withstand the effects of gradual currency depreciation.

He explained that moderate inflation will gradually erode the purchasing power of sovereign currency over time, making it crucial to hold physical or productive assets like gold to maintain wealth value.

"The entire system is set up for investors who hold so-called 'real assets,'" he pointed out, repeatedly emphasizing the strategic advantages of holding intrinsic value assets during the interview.

He described the current global economic design as fundamentally based on a debt model, where borrowing is often used to purchase tangible assets.

Sosnick also noted in the interview that this relationship between debt and assets explains why the market reacts strongly to the Federal Reserve's interest rate decisions. "We essentially have a debt-based economy, and this debt is being used to purchase real-world assets," he directly linked the Federal Reserve's monetary policy to asset valuation and financial market investment strategies.

Regarding the global stock market, including U.S. stocks, Sosnick believes that in a moderate inflation environment, equity assets such as stocks can still perform well, "because what you are buying is a share of an asset with actual productivity," Sosnick stated.

The "small spring" of the dollar cannot stop the long "bear path"Since the beginning of this year, Wall Street investment institutions and foreign exchange traders have remained consistently bearish on the US dollar. Strategists from JP Morgan and Deutsche Bank have stated that the dollar will continue to weaken, and foreign exchange options traders hold the most pessimistic outlook on the dollar in five years. Although the easing of US-China trade tensions last week temporarily boosted the dollar index, investors are generally cautious about re-holding the dollar.

Most hedge funds indicate that a potential "dollar bear market" that could last for years has just begun, triggered by the chaotic and disruptive "American Economic Transformation" actions of the Trump administration that undermine the global trading system. In particular, the erratic tariff measures of the Trump administration have caused significant turmoil in financial markets, irreversibly shaking investors' confidence in dollar assets, leading to the gradual collapse of the "American exceptionalism" narrative.

For more than a decade, "American exceptionalism" swept the globe, with investors in the US market enjoying the best returns worldwide. However, this narrative is now showing significant cracks, as a series of radical tariff policies recently initiated or proposed by the Trump administration have led more and more investors to worry about the risks of the US economy falling into "stagflation" or even "deep recession," which is the core logic behind the recent continued weakening of dollar assets.

In early April, the Trump administration announced tariff measures targeting countries worldwide and imposed tariffs as high as 25% on the automotive industry, causing all dollar assets to enter a downward trajectory, leading to the gradual collapse of "American exceptionalism." Shortly thereafter, Trump's threat to dismiss Powell, which jeopardized the independence of the Federal Reserve, significantly reduced global confidence in holding dollar assets. Additionally, most investors are betting that the inflationary trend brought about by Trump's aggressive tariff policies may further reduce spending among American consumers, who have been struggling due to persistently high inflation in recent years, exacerbating the collapse of "American exceptionalism."

Betting on the dollar's decline over the next year in the options market is currently at its highest level since 2020. These long-term options are typically operated by fund managers rather than short-term speculators, reinforcing the view that there is a broader reassessment of dollar exposure. Kamakshya Trivedi, global head of currencies at Goldman Sachs, stated this week: "American exceptionalism is gradually being eroded, and these measures will last longer."

Wall Street Still Envisions a "Gold Bull Market Curve"

Against the backdrop of ongoing corrections in gold prices and outflows from gold ETFs, Goldman Sachs' precious metals team released a report this week, maintaining its price targets of $3,700 per ounce for gold by the end of 2025 and $4,000 per ounce by mid-2026.

The Goldman Sachs precious metals strategy team emphasized that if a substantial global economic recession occurs, accelerated inflows into all gold-related ETFs could push gold prices to a new high of approximately $3,880 per ounce by the end of the year. Furthermore, in extreme risk scenarios—such as heightened concerns about the independence of the Federal Reserve or changes in US asset reserve policies—the spot price of gold could even rise to $4,500 per ounce by the end of 2025Goldman Sachs strategists pointed out that although the advancement of global trade agreements and the reduction of recession risks have decreased the extreme upside probability of gold prices breaking the benchmark forecast in 2025, current speculative positions are at a low level, providing investors with a favorable opportunity to establish long positions in gold. Therefore, they reaffirm the trading logic of going long on gold.

A survey conducted by Bank of America from May 2 to May 8 showed that investors' allocation to the dollar has fallen to a new low in nineteen years, with 57% of investors believing that the dollar is overvalued. Meanwhile, the Bank of America survey indicated that "going long on gold" has become the most crowded trade in the global financial market for two consecutive months, with 58% of investors considering it the most crowded trade, far exceeding the second-ranked "going long on American tech giants" (22%).

Bank of America strategist Hartnett, known as "the most accurate strategist on Wall Street," has repeatedly mentioned the "diversified allocation" strategy. This strategist, who has accurately predicted the timeline for the peak of the U.S. stock market multiple times since the pandemic, has repeatedly called for investors to allocate to international stock markets and go long on gold this year. The "BIG strategy" he leads—holding U.S. Treasuries, international stocks (excluding the U.S.), and gold in the long term until 2025—has indeed provided investors with a significantly higher overall investment return this year compared to the "Trump trade."