Peter Schiff Schiff does a victory lap as gold, the oldest store of wealth, keeps breaking new highs despite treasury bond yields heading higher.
Treasury bond yields and gold heading higher is an anomaly. Decades of market-watching, and we have not seen bond yields with gold both moving higher.
Has the US ballooning public deficit shooting past 34 trillion dollars and 1.6 trillion dollars in interest payments by year-end on the debt, making it the most significant government outlay, broken the market for US paper?
“Treasury bond yields and gold heading higher is an anomaly”
WEALTH TRAINING COMPANY
The opportunity cost of holding gold is the yield on a 2-year treasury note of 4.68%.
But despite returns of nearly 5% of US paper, the ounce of gold price keeps making new highs.
Reading between the lines, global investors are willing to forgo 5% of yield on US paper and would prefer to hold precious metals as a store of wealth.
In other words, currency devaluation based on stealth dollars being created to bail out failing banks and suppress yields to prevent a bond crash government default on the debt could mean investors think the exchange value of dollars against gold will continue to favour the precious metal. They could be right.
Put simply, in 2015, 10,000 USD, the world reserve currency, would buy an investor approximately 10 ounces of gold and 22 Bitcoin tokens.
Today, in 2024, 10,000 USD buys approximately 4.4 ounces and a tiny fraction of a Bitcoin token 0.15.
World reserve currency, USD, has been a trash investment over the last decade, destroying wealth. Wealth destruction has been even worse for currencies outside the USD. Currencies collapsing are already causing severe poverty, civil unrest and failed states.
“Reading between the lines, global investors are willing to forgo 5% of yield on US paper and would prefer to hold precious metals as a store of wealth”
WEALTH TRAINING COMPANY
For this reason, investors don’t want to hold bonds, a promise to receive a bundle of debased currencies on the maturity date.
Think about it. Investors who stored their wealth in Gold in 2015 feared far better than those who invested in the 10-year treasury with miserable yields. Treasury yields could have already hit a terminal rate, bearing in mind that interest payments on the public debt have hit a milestone of one trillion dollars. So, the Fed will create more currency to buy the bonds nobody wants, which further debases the currency, causing inflation. Inflation causes bonds to keep crashing, the Fed creates more currency again, inflation rises again, and it is a debt doom loop.
“The mainstream media has finally noticed #gold but has no idea why it’s rising, or has any appreciation for how high it’s going” – Ray Dalio
Peter Schiff Schiff does a victory lap as investors dump currencies and bonds to buy other assets
“DowJones just fell below 17 ounces of #gold. That’s a 7% decline so far this year. That proves the 2024 3.3% nominal gain is just an illusion created by #inflation. The Dow isn’t gaining value. The US dollar is losing it. The gold price of the Dow Jones is poised to crash!” he wrote on X.
“The mainstream media has finally noticed #gold but has no idea why it’s rising, or has any appreciation for how high it’s going. They’re also not encouraging anyone to buy it. All of this is a good sign that the rally still has a long way to go before any meaningful correction,” he added on X.
