Bessent believes the US is headed for an upward cycle, citing the Dow Jones’ record rally.
Gold prices fell sharply over the past week, abruptly ending a previously unprecedented rally. The precious metal had been surging as investors flocked to safe-haven assets amid rising geopolitical and economic uncertainty.
The volatility in gold prices coincided with a rebound in the US dollar and stock market, as well as US President Donald Trump’s nomination of Kevin Wash for the post of chairman of the Federal Reserve. The Dow Jones Industrial Average also hit 50,000 for the first time.
However, US Treasury Secretary Scott Bessent said unruly trading by Chinese investors was responsible for the wild swings in gold prices last week.
‘The gold move thing — things have gotten a little unruly in China,’ Bessent told a media outlet. ‘They’re having to tighten margin requirements. So gold looks to me kind of like a classical, speculative blowoff.’
His view highlighted the role of margin requirements in curbing excessive speculative trading. Bessent said Chinese authorities were compelled to tighten margin rules, a measure often used to limit rapid price surges driven by leveraged trading.
With midterm elections in November, Bessent said the Dow Jones performance is evidence that the US economy is moving towards an upward cycle that will benefit the common people. He said the strength in cyclical stocks indicates confidence in a broader recovery.
‘In my 35-40 years on Wall Street, that tells me Wall Street is telling you that Main Street is about to prosper,’ Bessent stated, highlighting record highs in the Dow and the Russell small-cap index. ‘The stock market lives in the future,’ he added.
On Federal Reserve policy, he expects the central bank to tread carefully when it comes to any effort to trim its balance sheet. ‘I wouldn’t expect them to do anything quickly. They’ve moved to the ample-regime policy, and that does require a larger balance sheet, so I would think that they’ll probably sit back, take at least a year to decide what they want to do,’ Bessent remarked.
On Trump’s Fed chair nominee, the official added that Warsh is ‘going to be very independent, but mindful that the Fed is accountable to the American people.’
The Big Short’s Michael Burry recently said that Bitcoin prices could fall further, which could push miners towards bankruptcy and impact the balance sheets of major corporate BTC holders like Michael Saylor’s Strategy.
He also attributed the gold and silver price corrections to the Bitcoin crash, arguing that corporations had to de-risk by selling profitable positions in tokenised gold and silver futures. Tokenised metal futures, which are not backed by physical metals, can overwhelm trading in the physical market, according to the investor who predicted the 2008 global financial crisis.
He cautioned that if Bitcoin fell to $50,000, ‘tokenised metals futures would collapse into a black hole with no buyer’. Bessent also sought the swift passage of crypto market structure legislation, explaining that regulatory visibility is crucial if the US plans to become the ‘crypto capital of the world.’
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