Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

How Might Gold, Silver and T-bonds Behave in a Bear Market?

Stock-Markets / Financial Markets 2010 Apr 08, 2010 - 10:21 AM GMT

By: EWI

Stock-Markets

Best Financial Markets Analysis ArticleCan precious metals and U.S. Treasury bonds fall together?

Enjoy this excerpt from Elliott Wave International's free Club EWI resource, Independent Investor eBook (Now With 6 New Chapters!). Please see details on how to read the entire eBook below.


Gold, Silver and T-bonds

This section will offer a novel viewpoint. Can you imagine a scenario under which precious metal and Treasury bond prices would fall together? Most people would think such an event would be impossible. After all, as we showed in our study of March 2008, bonds do well during deflationary recessions, and gold goes up during inflationary booms. Shouldnt they be contra-cyclical?

Look at Figure 3 and realize that gold and T-bonds have been going up together for an entire decade.

major-tops-in-two-major-mkts

This is completely normal behavior according to our liquidity theory of market movement at the end of credit bubbles and their aftermath, as proposed in Conquer the Crash back in 2002. If gold and T-bonds can go up together for ten years, they certainly can go down together as well.

[Here is a scenario that] is likely to occur later, but since it could happen now, let's review it. ...U.S. Treasuries cannot hold up forever, particularly given the drunken-sailor approach to fiscal management that Congress has practiced over the past century and which has accelerated madly in the past eight years and even more outrageously since last September. At some point, Uncle Sam's credit rating will begin to slip. According to the price of credit-default swaps on U.S. Treasury debt, it is already slipping.

When the monopoly issuing agent of dollar-denominated debt -- the Federal government -- begins to lose credibility as a debtor, the U.S.'s great experiment in fiat money will end. Read it here first: The U.S. government is the borrower of last resort. When it can't borrow any more, the game will be up, because the government's T-bonds are the basis of our "monetary" "system."

What will happen when creditors begin to smell default? They will demand more interest. At first, it might not be much: 4%, 6%. But as the depression spreads, spending accelerates, deficits climb and tax receipts fall, the rate that creditors demand might soar to 10, 20, 40 or even 80%. In 1998, annual bond yields in Russia reached over 200% before the government finally threw in the towel and defaulted.

Prices of outstanding bonds, of course, collapse when yields surge. As rates rise, many people will sell other investments to lend at these "attractive" rates. In such a situation, T-bonds would be the primary engine of falling prices, as they suck value from other investments. So, this is another way that gold and bond prices can go down at the same time. ...

Finish reading this groundbreaking and powerful 118-page eBook now, free! Here's what else you'll learn:

  • Why Buy and Hold Doesn't Work Now
  • How To Invest During a Long-Term Bear Market
  • The Biggest Threat to the "Economic Recovery" is ...
  • The Errors in "Efficient Market Hypothesis"
  • How To Be One of the Few the Government Hasn't Fooled
  • MUCH More!

Keep reading this free 118-page eBook now -- all you need to do is create a free Club EWI profile.

Elliott Wave International (EWI) is the world's largest market forecasting firm. EWI's 20-plus analysts provide around-the-clock forecasts of every major market in the world via the internet and proprietary web systems like Reuters and Bloomberg. EWI's educational services include conferences, workshops, webinars, video tapes, special reports, books and one of the internet's richest free content programs, Club EWI.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules