“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”, John Templeton
As @DTAPCAP has been saying for a while, gold is now a substitute for bonds and have been for quite a while. Nominal yields and gold are highly correlated. It is a deflation hedge currently, not an inflation hedge. Chart is of 10 yr bond futures vs gold. Fascinating... pic.twitter.com/FYoftbtdwB— Raoul Pal (@RaoulGMI) February 16, 2021
Nominal yields and gold are NOT highly correlated. This is not my opinion but rather interpretation of actual long term data. While these types of comments probably take us off the "friends" list discussions that live stream for hours and provide just enough information to get listeners caught on the wrong side of the trade, they're necessary for real learning and understanding.
Correlation analysis of gold and long term yields defines a random relationship between the two. We can eyeball the randomness by looking at long term charts of gold and yields (chart 1 & 2). Gold can rally just as easily against rising yields as it does falling. Investors can't craft explanations that only suit one time period. Clearly something else is going on.
That something is CONFIDENCE. Confidence is why gold and silver investors listening to asinine live streams and podcasts regularly get their bottoms paddled by the invisible hand.
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