The OMFIF Podcast After Liberation Day: gold, rates and currency shifts
Jun 16, 2025
Max Castelli, Head of Strategy for Sovereign Institutions at UBS Asset Management, discusses the implications of US policy changes following Liberation Day. He highlights the evolving dynamics of the U.S. dollar and its safe haven status amid market volatility. The conversation shifts to the increasing importance of gold as a safe-haven asset in uncertain times, particularly for central banks diversifying portfolios. Castelli also explores the challenges Europe faces in enhancing its global currency influence and how technology affects reserve management.
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Dollar's Safe Haven Status Shaken
- The safe haven status of the U.S. dollar and treasury market has been shaken since Liberation Day with unexpected dollar weakening and rising yields.
- Central banks may accelerate diversification away from the dollar, favoring currencies like the euro, yen, and RMB, but dollar dominance won't disappear quickly.
Europe’s Challenge to Dollar Dominance
- Europe could benefit from dollar diversification if it advances fiscal and financial integration to grow its capital markets.
- Political fragmentation and structural weaknesses limit Europe's potential to challenge the dollar soon despite investor optimism.
Gold as a Geopolitical Hedge
- Gold demand by central banks increased as a hedge against geopolitical and sanction risks, with emerging markets leading purchases.
- Gold remains a macro hedge asset, but its lack of yield and liquidity constraints limit its role as a fundamental reserve pillar.