"China has a stranglehold on rare earths, producing more than 90% of the world's processed rare earths and rare earth magnets. That has served as a key source of leverage over the U.S. The divergence between the dollar and gold is notable because stock market selloffs historically have sent investors to the dollar as a safe haven. But just like in the fallout from Liberation Day, that dollar pattern didn't hold, and gold instead was the preferred refuge from trade war chaos."
"The S&P 500 sank 2.7%, its worst selloff since April 10. Meanwhile, the U.S. dollar index plunged nearly 0.7% as Treasury yields fell, while gold prices surged more than 1.5%. "Markets are again thinking that the US holds the shorter straw in the tariff fight with China," Robin Brooks, a senior fellow at the Brookings Institution, wrote on Substack on Saturday."
Tariff escalation between the U.S. and China, including a threatened 100% U.S. tariff and U.S. limits on software exports after China restricted rare-earth shipments, triggered sharp market moves. The S&P 500 fell 2.7%, marking its worst decline since April 10. The U.S. dollar index plunged nearly 0.7% as Treasury yields fell, while gold climbed over 1.5%. Markets treated the measures as potentially more damaging to the U.S. than to China. China supplies more than 90% of the world's processed rare earths and rare-earth magnets, creating strategic leverage. Gold became the preferred haven instead of the dollar.
Read at Fortune
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