Gold Hits $5K — What’s the Market Afraid Of?
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Today's number? $500,000. That is roughly how many dollars Alex Honnold was reportedly paid to free-climb a 1,600-foot tower in Taiwan last week. On a risk-adjusted basis, that makes it the lowest ROI decision in history. Money markets matter. If money is evil, then that building is hell. The show goes on! The folks in there are watching. Show! Show! Welcome to Prof G Markets. I'm Ed Elson. It is January 27th. Let's check in on yesterday's market vitals. Major indices rose heading into a key earnings week. Treasury yields declined. The dollar tumbled. And finally, silver gained the most since the financial crisis. And gold breached a new milestone. More on that in a minute. Okay, what's happening? Stocks carried their rally into the new week following President Trump's Greenland taco, but global tensions are still gripping markets.
President Trump threatened Canada with a 100% tariff over a potential trade deal with China on Saturday. Meanwhile, the dollar sank to its lowest level since 2022. That slide came amid fears of a government shutdown and talk of U.S. intervention to stabilize the Japanese yen and, of course, The metals rally rages on. The price of gold just hit $5,000 per ounce for the first time ever. Joining us to break down what is moving markets right now, a lot in there. We're speaking with Robert Armstrong. Rob is the author of the Unhedged newsletter and co-host of the Unhedged podcast. You all know him. He's a regular at this point. Rob, thanks for joining us. Nice to be back. A lot we want to get into here. I think I would love to start with your reactions to last week's taco.
It feels like years ago because so much has happened in the past several days. Not really markets news, but we can just set that aside for now. Let's just focus on the taco. We want to get your reaction because, as I remind everyone, you invented the term taco. We're now seeing another taco, this time with Greenland. He decided to pull those Europe tariffs after, you know, things went kind of... I don't know if nuclear is the right word, but people were pretty riled up about what was happening with Greenland. What do you make of last week's taco? What does it tell us going forward?
Well, the first thing I would note is that the markets didn't move very much on this crazy plan of Trump's, this crazy saber rattling on Greenland. So, you know, the S&P was down a couple of percent. The dollar was a percent weaker or maybe a little more. So it didn't seem like he was scared off by markets exactly. Right. So and that's kind of a theme that the market's reaction function to crazy Trump stuff does seem to be getting blunted over time. But maybe, you know, it's the politics. He just realized at some point that he was holding a losing hand against Europe and And he folded. I mean, I think, you know, and maybe we ought to be glad this is a guy who cuts his losses when he realizes the other team isn't going to just shrivel.
Yeah. He also threatened these tariffs on Canada if they go ahead with this China deal, which My instinct here is we'll probably see a taco again. I mean, I'm just trying to figure out if there's any rubric or formula that you can follow as an investor or even as just a market observer when Trump comes out and makes these statements about tariffs. Like, do you just... not believe them?
I think in this case, with the Canada tariffs, you can be pretty confident not believing them, that they're going to end up anywhere near 100%. Yeah. Trump has shown no appetite for outright trade embargoes, which is what a 100% tariff amounts to. If we cut off all trade with Canada... there would be howls of pain in the U.S. economy as well as the Canadian economy. And it would just be more than the president could take. So I would 100% bet on a taco in this case. There's just no way. It's not practicable. It was just an expression of rage, I think. Not a policy proposal.
I've had a thought recently after this, after last week's taco. I wonder if investors would be better off never, ever listening to anything that he says.
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