Gold Today: Could it all end with sovereign debt bond markets bubble?

Gold Today: Could it all end with sovereign debt bond markets bubble?

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Marc Faber – Why is China Buying Gold?

For the latest Marc Faber, go to MarcFaberBlog.com – In a recovery like we have now, risk appetite is coming back. Because of that, silver may outperform gold for a while. If you want to store your own monetary metal, gold is more compact and easier to store. The Chinese have very large reserves, and when they look at Bernanke they don’t want to do business with him. For this reason, they are buying things like gold and copper. Resources for them are a top geopolitical priority because they are naturally poor in those resources. They don’t trust the dollar anymore, and rightfully so. The Chinese recently announced that it had acquired more than 400 tons of gold, and once the market was made aware of this news, the price rose sharply. Once the government debt is sufficiently large, the government bond market will break. The temptation will be to keep interest rates artificially low. Some Harvard grads have proposed that there be a negative interest rate in order to stimulate the economy. It is mind-boggling what kind of nonsense these people think. But this is exactly the same state of mind at the Federal Reserve. Without inflation, the entire system would have completely collapsed. They are postponing the true solution. The United States government currently has a AAA credit rating, but there is no way that they deserve that rating. They will keep lending money to banks for free, and this will lead to more unintended consequences.
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US Treasury Bonds vs Gold: Which one is over-priced?

A dramatic change in the 30 year old relationship between US Treasury bond yields and gold starting in 2001. Eric Janszen’s theory is that the gold price is acting the way the forward currency markets do when a debtor country is approaching a balance of payments, sovereign debt, and currency crisis. The 20% correction in bond yields since Oct 2010 may signal the early stages of a US currency and debt crisis in 2011.

Gold Bubble or Treasury Bubble?

Alex Merced discusses the argument for a gold bubble and trasury bubble, and which one makes more sense.
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