Gold vs. long bonds: a market rumble?Posted: November 7, 2009
At the Wall Street Journal’s MarketBeat blog, Joanna Slater posits “a prizefight underway in markets, with two heavyweights slugging it out for bragging rights and big winnings.” The contenders: gold and treasuries:
In the yellow trunks: gold, which surged to yet another record price today, hitting over $1,100 per ounce before retreating. For the legions of gold fans, the Federal Reserve’s unprecedented efforts to pump money into the economy will end badly, igniting inflation.
In the red, white [and] blue trunks: Treasurys. Yields on longer-dated government bonds remain relatively subdued, a sign that investors aren’t overly worried about a massive upsurge in prices. Today, investors bought Treasurys, sending yields lower, as they digested a poor unemployment figure that underlined the fragility of the economy. The yield on the 10-year Treasury bond was recently trading at around 3.50%, below its recent peak of 3.95% in June.
Though long treasury bonds are above their June lows, they have greatly underperformed gold since the beginning of the year. The iShares Barclays 20+ Year Treasury Bond ETF (ticker: TLT) is down 21.8 percent year to date, whereas SPDR Gold Trust ETF (ticker: GLD) is up 24.2 percent year to date.
Even shorter-term treasuries have underperformed. The iShares Barclays 7-10 Yr Treasury Bond ETF (ticker: IEF) is down 7.8 percent year to date. The iShares Barclays 3-7 Yr Treasury Bond ETF (ticker: IEI) is down 3.2 percent year to date.
If this were a boxing match, gold would be declared the winner by TKO.