The announcement of a US-Iran ceasefire by Trump has triggered a surge in global risk assets, but an unusual signal of gold prices rising in tandem is alerting investors that this "TACO-driven market" differs from previous ones, potentially hiding the cost of an accelerating crack in US dollar credibility.
On June 14th, Trump announced a ceasefire agreement between the US and Iran, leading to widespread gains in global risk assets the following day. A strategy team from Western Securities pointed out that the recent sharp rise in the US 10-year Treasury yield, breaching 4.5%, and the resulting liquidity risks were the primary factors "forcing" Trump to urgently seek a ceasefire. However, unlike the situation in May last year when Trump paused the tariff war, this ceasefire agreement contains numerous clauses unfavorable to the US, fails to substantively constrain Iran's nuclear issue, and does not resolve the fundamental conflict of Middle Eastern geopolitical risks.
More alarmingly, gold prices rose simultaneously with this surge in risk assets. This "resonance" signal clearly deviates from the market performance seen when the tariff war was paused in May 2025. Western Securities believes that Trump's eagerness to extricate himself from the US-Iran conflict this time actually sends a key signal to the market: the US may no longer be able to maintain Middle Eastern order through unilateral means, the foundation of the "petrodollar" system is shaking, the crack in US dollar credibility may accelerate its expansion, and this could mark the beginning of gold's fourth major "upward wave."
Two TACOs, Different Contexts
Understanding the limitations of this ceasefire-driven market requires a comparison with the tariff war TACO in May 2025.
In mid-May last year, US Treasury yields broke through 4.5% and surged rapidly, with liquidity risks forcing Trump to announce a delay in the global tariff war. At that time, the decision to impose global tariffs rested entirely with Trump. Once he chose TACO, the risk of a tariff war could be temporarily lifted, leading to a rapid decline in US Treasury yields and a "resonant surge" in global risk assets.
The current situation is entirely different.
The report notes that, according to content disclosed by Iran's Mehr News Agency, the US-Iran ceasefire agreement requires the US and its allies to provide no less than $300 billion for Iran's national economic recovery plan—essentially "war reparations"—which adds considerable uncertainty to subsequent negotiations. According to Xinhua citing Trump's statement on Tuesday, the US will not invest any funds in Iran.
More importantly, the resolution of Middle Eastern geopolitical risks does not depend solely on Trump's will. The US's ability to constrain Israel from escalating the situation in the Middle East remains to be seen, and the primary say over whether the Strait of Hormuz returns to its pre-war state of free passage lies with Iran.
US Treasury Yields "Easier to Rise, Harder to Fall," Ceasefire Fails to Resolve Fundamental Conflict
Western Securities had previously warned in a report that unless the US could quickly quell the US-Iran conflict, US Treasury yields might be "easier to rise, harder to fall." This logic remains valid.
Firstly, the Shiite "Axis of Resistance" formed by Lebanon, Iran, and Yemen remains unbroken. One prerequisite for the US-Iran ceasefire is restraining Israel from attacking Lebanon, which currently seems difficult to achieve.
Secondly, traffic through the Strait of Hormuz remains low and will require time to return to normal levels.
More critically, unless the US can gain actual control over the Strait of Hormuz, even if the strait nominally achieves free passage, major global nations will still fear another blockade by Iran, potentially leading to large-scale oil stockpiling. This means the spiral of high oil prices, high inflation, and high US Treasury yields is difficult to break in the short term, suppressing the potential for US Treasury yields to decline.
Expanding Crack in Dollar Credibility, Gold's Fourth Wave May Begin
Western Securities argues that the deeper impact of this US-Iran conflict lies in the shaking of the "petrodollar" system's foundation, which is key to understanding the unusual phenomenon of gold rising in sync with risk assets. The institution explicitly states that gold's "fourth wave" may commence from this point.
The institution outlined three previous expansions of the crack in US dollar credibility since 2016:
During the 2016 South China Sea issue between China and the US, America's attempt to suppress the internationalization of the Chinese yuan to strengthen dollar credibility instead led to a loosening of the "commodity dollar" system. Gold prices surged against the trend during the Fed's 2016-2019 rate hike cycle.
During the 2022 Russia-Ukraine conflict, the US attempted to strengthen dollar credibility by undermining Russia-Europe economic integration, but this actually accelerated global central banks' gold accumulation, and gold prices again rose against the trend during the 2022-2024 rate hike cycle.
In this US-Iran conflict, the US originally attempted to strengthen the "petrodollar" by driving up global oil prices. However, the substantive change in control over the Strait of Hormuz has instead shaken the Middle Eastern geopolitical foundation of the "petrodollar." Western Securities points out that deindustrialization leading to a trend of weakening US military capability is the main reason for the continuous expansion of the crack in dollar credibility. Each attempt by the US to repair this credibility has, in fact, accelerated the crack's widening.
Trump's urgency to TACO and withdraw from the US-Iran conflict this time highlights the fragility of US Treasury, dollar, and US stock market liquidity, formally signaling to the market that following the loosening of the "commodity dollar" system, the "petrodollar" system may also be on the verge of loosening.
Based on the above analysis, Western Securities recommends that asset allocation continue to focus on a "bull market barbell strategy" centered on "AI + price increases."
On one side, monetary policy remains accommodative, and AI has not yet reached bubble levels, but investors must accept the high volatility of AI computing hardware (communication equipment, semiconductors, memory, etc.). On the other side, potential Fed QE could become an opportunity for domestic debt restructuring and balance sheet repair. It is essential to grasp the PPI-driven price increase chain (coal, oil, chemicals, new energy) while patiently waiting for the CPI-driven price increase chain (real estate, baijiu, etc.) driven by balance sheet repair in the second half of the year.
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