Yet Another Case for the Long Bond

In this post Steve Saville shows the long-term correlation between the 30yr bond and the Gold/Commodities ratio.

Revisiting the Age-Old Relationship Between Interest Rates and Prices

Almost as if Steve’s ears were burning (after my post tapping the breaks on the bond bear case) he offers up more reason not to be a full bore bond bear just yet. It has to do with the very logical correlation of this chart.

bonds, gold and commodities

He then presents a shorter-term chart showing a recent disconnect and…

The next chart zooms in on the most recent 2 years and shows that over the past three weeks there has been a significant divergence, with the gold/commodity ratio turning upward and the T-Bond price staying on a downward path. It’s a good bet that this divergence will be eliminated within the next two months via either a decline in the gold/commodity ratio to a new multi-year low or a rebound in the T-Bond. My money is on the latter.

Check out the article. It’s well worth your time.

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