The Gold Rush of 2025 Continues

For the week ending 10 October 2025

As of midday Friday, global equities traded near record levels despite the lingering US government shutdown. The yield on the US 10-year Treasury note was little changed from a week ago at 4.10%, while the price of a barrel of West Texas Intermediate crude oil fell, flirting with $60, amid declining Mideast tensions. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), was steady at 17.7. 

MACRO NEWS

Debasement trade sends gold to record highs

The spot price of an ounce of gold neared $4,060 on Wednesday before pulling back below $4,000 on Thursday. While the financial press has labeled this rise in gold as a repudiation of the US dollar, analysts at Ned Davis Research note that the yellow metal’s strength is broad-based, trading above its 200-day moving average against each of the 21 most liquid currencies. Indeed, the US dollar has rallied this week, and Treasuries have traded in narrow ranges, an unlikely backdrop if global investors have lost confidence in the greenback. Also helping to fuel the latest surge in gold: heavy and consistent buying by central banks looking to avoid US sanctions, risk such, such as China and Russia; concerns over the deteriorating fiscal positions of most developed economies; and growing speculative buying by retail investors. . France’s ongoing struggles to form a government and pass a budget, along with the election of a fiscal dove to lead Japan’s Liberal Democratic Party, added to this week’s upward momentum.

Israel, Hamas agree to end war in Gaza

Days after the two-year anniversary of the 10/7 attacks on Israel by Hamas, the two sides agreed to end the war. Hamas will release the remaining hostages and the bodies of those who died in captivity, and Israel will release nearly 2,000 prisoners. The exchange is expected to take place on Monday. A ceasefire took effect on Friday, with Israeli forces pulling back to agreed-upon lines and refugees returning home. US President Donald Trump is traveling to Egypt on Sunday to be on hand for the signing of the agreement and will address Israel’s parliament on Monday.

Does the French PM’s office needs a revolving door?

French President Emmanuel Macron is set to appoint his fourth prime minister in a year; after his close ally Sébastien Lecornu resigned early this week after failing to break the legislative logjam in France’s National Assembly. Macron is expected to appoint a new PM as early as today. After appointing a series of center-right premiers, pressure is building on Macron to appoint someone from the center-left to stabilize the situation. After a last-ditch consultation with deputies on Wednesday, Lecornu found that the majority of them oppose dissolving parliament and holding a snap election.

Takaichi’s surprise win sends Nikkei soaring

Saturday’s surprise election of Sanae Takaichi as president of the ruling Liberal Democratic Party (and therefore Japan’s presumptive first female prime minister) sent local equity markets higher this week, as Takaichi supports a reflationary policy mix of looser fiscal policy and more gradual monetary tightening than her rivals. The yen weakened sharply in the wake of her election as the market prices in a more gradual pace of policy normalization by the Bank of Japan. The move was abrupt enough to prompt Takaichi to jawbone markets, saying she has no intention of triggering an excessively weak yen. That help calm markets and contributed to gold’s pullback on Thursday. Her road to the premiership got rockier on Friday when the LDP’s long-time coalition partner, Komeito, pulled out of the alliance.

Shutdown drags on for 10^th day

While there are few outward signs of movement toward resolving the US government shutdown, talks are taking place among a bipartisan group of senators to lay the groundwork for the extension of health care subsidies once the government is reopened. Republican leaders remain adamant that substantive talks will only take place once short-term stopgap measures are in place to fund the government for an additional six weeks. 

QUICK HITS

Late Friday morning, President Trump threatened a massive increase in tariffs on Chinese goods, saying China had become very hostile regarding export controls on rare earth minerals. Trump said there appears to be no reason to meet with Chinese President Xi Jinping in South Korea at the end of the month. US equities pulled back sharply on the headlines.

Frank Bisignano, who currently serves as Commissioner of the Social Security Administration, has also been appointed as the CEO of the Internal Revenue Service, the US Treasury Department announced on Monday. Bisignano will manage the IRS and oversee the bureau’s day-to-day operations while continuing to lead the Social Security Administration. He will report to Treasury Secretary Scott Bessent, who also serves as acting IRS Commissioner.

Brazilian President Luiz Inácio Lula da Silva met with President Trump via video conference on Monday in a call that both sides described as “friendly.” Lula asked Trump to roll back the 40% tariff he placed on Brazil in late July; no decision was made, but the two leaders expect to meet in person in the weeks ahead.

Canada is overhauling its budgeting process. Starting this year, the economic and fiscal update, traditionally presented in the fall, will now be released in the spring to coincide with the start of the fiscal year, which begins April 1.

President Trump announced that on November 1, previously disclosed tariffs on medium and heavy duty truck imports will take effect.

European Central Bank President Christine Lagarde said this week that sluggish exports and a strong euro will combine to hold back the eurozone economy this year, though these headwinds should fade .

Inflation expectations in the US edged up in September, a Federal Reserve Bank of New York survey showed. One-year expectations rose to 3.4% from 3.2% in August, while they held steady over a three-year horizon. Over the five-year view, inflation is expected to tick up to 3% from 2.9%.

On Wednesday, New Zealand’s central bank cut interest rates by 50 basis points to 2.5% and said it is open to further reductions in order to stimulate demand amid sluggish economic growth.

Canadian PM Mark Carney met President Trump at the White House on Tuesday but came away from the meeting without the hoped-for relief on steel and aluminum tariffs. Despite this disappointment, Canada called it “a successful, positive, substantive conversation.”

The Bank of England on Wednesday warned that the risk of a "sharp market correction" has increased, noting that stock market valuations appear stretched, particularly for artificial intelligence-focused tech firms.

IMF Managing Director Kristalina Georgieva said this week that equity valuations are heading toward 2000 dot-com heights, and she fears that a severe correction could weaken growth. She said the tariff shock hasn’t been as large as thought, slowing global growth only slightly.

The minutes of the September FOMC show that participants “judged that downside risks to employment had increased over the intermeeting period, and that upside risks to inflation had either diminished or not increased.” Most said it would be appropriate to ease policy further this year.

Ahead of legislative elections later this month, political uncertainty has undermined confidence in Argentina’s peso. The currency plunged this week, prompting Argentina to deploy a substantial portion of its reserves to slow the peso’s decline. The US and Argentina finalized a $20 billion swap line, and the US Treasury Department announced on Thursday that it has intervened in Argentina’s currency market. The US backstop is expected to allow Argentina to rework its economic program with the IMF.

The Congressional Budget Office estimates that the Fiscal Year 2025 US federal budget deficit held steady at $1.8 trillion.

Canada added 60,400 jobs in September, a much stronger outcome than expected, though the unemployment rate held steady at 7.1%. Odds of a rate cut by the Bank of Canada at the end of the month plunged from about 58% at yesterday’s close to 18% after the data.

Bloomberg reported Thursday that the US Bureau of Labor Statistics has recalled staff (furloughed due to the shutdown) to prepare the September consumer price index report. This report is needed to calculate the size of next year’s Social Security checks, according to a Labor Department official with knowledge of the matter.

THE WEEK AHEAD

Monday: China trade balance

Tuesday: UK unemployment, US NFIB survey

Wednesday: China, inflation; Japan industrial production; eurozone industrial production

Thursday: UK GDP; eurozone trade balance

Friday:  Eurozone CPI 

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.