Gold to Decouple from Treasuries – Ep. 501

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The Las Vegas Trading Conference, Oct. 4-5
The Dallas Money Show October 13-14
and the New Orleans Investment Conference, Nov. 1-4

Dow 200 Points from Record High

It was pretty quiet today in the equity markets; the Dow Jones managed to inch up 37 points, closing at 27,219 but, you know, how we’re less than 200 points away from a new all-time record high in the Dow Jones.

Long on Bonds? Bad Friday 13th!

But the real action today was in the bond market. If you’re suspicious on this Friday the 13th, and you were looking for bad luck, that’s where you would have found it, if you were long the bond market.  Now, I’ve been talking about this bond market bubble for a long time – it’s been inflating for a long time. Whether or not it’s actually popped, well, we’ll have to wait a little longer to find out.  But the carnage in the bond market that I mentioned on my last podcast has continued, with bonds continuing to suffer.

Biggest Single Day Decline on 10-Year Treasury

In fact, today was the biggest single day decline of the entire move.  The yield on the 10-year Treasury up to 1.903%.  Now, of course, it’s still a very, very low yield, but when you consider that a week ago, we were as low as 1.429%.  That is a huge increase, percentage-wise, in the yield on the 10-year bond, which means a big drop in prices.

Risk in Bonds if Interest Rates Go Up

I’m not sure the percentage decline; maybe 5 or 6% was the drop, which, in the stock market, that’s not a big deal.  Stock prices could drip 5% in a week – no big deal. But when the price of a bond drops by 5% in a week, especially a Treasury bond – people think about Treasury bonds as being risk-free – well, there’s actually a lot of risk.  Especially when you’re buying a bond with such a low coupon. There’s a lot of risk if interest rates go up, then the value of that bond is going to go down.

Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.



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