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Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Are rising interest rates bullish or bearish for gold?
Posted on 11/27/2006 04:37 AM | Link | Post Comment
The lead-lag relationship between gold-related investments and long-term interest rates is illustrated by the following chart comparison of the 10-year Treasury Note yield and the Barrons Gold Mining Index (BGMI). With the 10-year yield lagged by one year it is apparent that major and intermediate-term turning points in the BGMI generally correspond quite closely with similar turning points in the long-term interest rate.
The above chart's overarching message is that rising nominal long-term interest rates may or may not be bullish for gold-related investments, but rising prices for gold-related investments are most definitely a bullish omen for long-term interest rates (a bearish omen for bond prices). Therefore, if gold is in a secular upward trend then so are long-term interest rates unless the relationship depicted on the above chart has recently changed.
The above chart's overarching message is that rising nominal long-term interest rates may or may not be bullish for gold-related investments, but rising prices for gold-related investments are most definitely a bullish omen for long-term interest rates (a bearish omen for bond prices). Therefore, if gold is in a secular upward trend then so are long-term interest rates unless the relationship depicted on the above chart has recently changed.
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