Warsh, Bessent Credibility Crisis Sparks Gold, Crypto Buying Spree

Kevin Warsh's credibility is under fire after he accepted the role of Fed chair despite witnessing pressure from the White House against his predecessors. His recent press conference was seen as bungled, and market participants lost faith in him.

The situation worsened with Scott Bessent's attempt to bully the bond market with a threat of upsized Treasury buybacks, which backfired and rekindled the 'debasement' trade.

Gold and crypto funds saw massive inflows of $10.5 billion in the week following Bessent's announcement, with gold funds taking in $7.3 billion and crypto funds taking in $3.2 billion.

BofA's Michael Hartnett believes that Warsh needs to come across as 'credibly hawkish on inflation' to anchor the short-end and 'flirtatiously dovish on the long-end' in support of Bessent's buybacks for risk assets to rally and the dollar to find its footing.