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But this isn't accurate either. Gold is highly correlated with interest rates. Why would I want to hold a rock that yields nothing if there are bonds that yield
by fny 6y ago
But this isn't accurate either. Gold is highly correlated with interest rates. Why would I want to hold a rock that yields nothing if there are bonds that yield a real return?
As of now we haven't hit a regime of negative real yields on long dated treasuries in the US. After being at ZIRP for decades with new inflation fears, I'd bet gold will continue to be punished as yields rise, so you may never see that same signal from Y2K.
- jkhdigital 6y agoGold has no yield (more like negative yield, due to carrying cost)... but also has no counterparty risk. Gold is an interesting option when real yields suck, but the real purpose is to preserve some semblance of wealth when the sovereign becomes insolvent.
- tylerhou 6y agoThe counterparty risk is that when the sovereign becomes insolvent, people won’t want to buy your gold because they’d rather have food and water.
- vijayr02 6y agoI think the risk when the sovereign goes insolvent is a bunch of people with guns turn up and take your gold away. Sometimes the insolvent state and the people with the guns may even be the same.
- eloff 6y agoStocks are highly correlated with interest rates too. For the same reason. I think it's a pretty reasonable look at the value of stocks in something tangible. Maybe you could compare the stock market to the price of a gallon of milk or something, but gold is a fairly natural choice.