US Treasuries Bubble and Gold

This week's Barron's cover story on the bubble in US Treasuries includes this nugget:

One sign of trouble for treasuries is the resilient price of gold, which has risen $150 an ounce since late October, to $880 an ounce, despite weakness in most commodity prices. Investors rightly see gold as an appealing alternative to low-yielding Treasuries and virtually nonexistent yields on short-term debt as the government cranks up its printing presses. Gold was up $45 an ounce last year, while oil was down 50%. Another worrisome indicator: The dollar has weakened recently, losing 10% of its value against the euro in the past month.

And this weekend saw Breakingviews.com expressing its own positive view of gold -- and its not just an American thing:

The US is not alone. Around the world, governments have implemented large stimulus packages. If the corresponding borrowing is not to crowd out the private sector, it must be financed by money supply creation.

This monetary expansion is not supposed to be inflationary, since the governments promise to take any money away before it can push up prices.

But investors can be forgiven for scepticism. Higher inflation is at least possible once the global recession bottoms out. And gold provides good insurance against this outcome.

I'm no gold bug. Or even a gold investor (bullion or mining stocks). But I carry around currency in my wallet. So if gold is truly real money, I want to be aware what's going on with it.

Comments

[jason thomas]

great post, keep it up. i also feel that I think financial institutions are in trouble. with the markets frozen, these P2P lending sites are stealing market share, by eliminating the middle man. Plus the returns seem unreal, this guy says it good at

http://www.crashmarketstocks.com/2009/01/doom-in-detroit-profits-taken-after-3.html

[CONTROLLED GREED.com]

@jason: I don't have an opinion on your linked piece. But I'd be very careful about putting money in bank stocks. Not to say I'd never do it, just saying there's even more risk in that group than others.