Thought Questions for Goldbugs

[Eddie]

I first posted this on GO's Gold and Silver News, but decided to move it here. Just because I want to count how many people actually read it. LOL. It's not really news anyway, just some some food for thought.


Can you pick out the chart that doesn't match the rest?

What happened?

Why are all the other charts the same?

What does it mean?












Congratulations if you said the last chart, the long term chart of Treasuries vs. Gold. You are a winner!!!

Now, what possible take-aways can we get from this little study?

A few thoughts:

Until 2006 there was no real correlation between the 10 Year T-Bond yield and spot gold price.

Around 2004 gold started a major new bull market .

In late 2004 GLD, the world's flagship gold ETF went online.

In 2006 gold began to show a dependable inverse correlation to the 10 Yr T-Bond yield, which continues until now.

Gold topped when the T-Bond hit its (then) all time low yield in 2013 at 1.44%. It topped again in 2016 when the 10 year yield hit a new bottom of 1.37%.

At the present moment in time, gold spot price and the 10 Year yield are converging again, signaling a rise in gold and falling 10 Year yields that might meet soon around $1260 gold and 2.1% on the 10Yr. (See the one year chart at the top.)

My questions:

1. Is the current demonstrable correlation between bonds and gold caused by investors moving back and forth between GLD and
   Treasuries?

    (Answer: I think so)

2. Does the zero bound for interest rates then effectively cap the price of gold at some level?

   (Answer: Probably, until the correlation breaks down. It's been observable now for a solid ten years.)

3. How long will this correlation continue to be observed?

    (Answer: Until something happens that make US bonds a lot less attractive to big investors, or GLD and other metals ETFs go tits up.)

3. What will break the lockstep movement between bonds and gold?

     (Answer: I don't know.)

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[azozeo]

Thanks Teach.
We're a couple of Maytag repair men here.

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[Eddie]

Thanks Teach.
We're a couple of Maytag repair men here.

For sure.

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