Chart: Gold vs Bonds
This may be the most contrarian piece of information you’ll see this year.
$Gold - main 2612(GCmain)$ $SPDR Gold ETF(GLD)$ looks expensive.
Bonds look cheap.
Interestingly, both have actually been a losing position this year, with gold down -4% YTD and long-term treasuries down -11%. The difference is one is nearing the end of a prolonged bear market, and the other is just beginning.
The most contrarian trade right now would be short gold vs long bonds.
But just because something is contrarian doesn’t mean it’s right. The rest of the elements need to fall into place. Coming from a starting point of valuation-extremes like that on display in the chart above certainly sets the scene, stimulates the imagination, and helps form future expectations.
The next piece to consider is the relative price performance line.
Gold has a habit of undergoing multi-year waves of outperformance vs bonds e.g. twice in the 1970’s, the 2000’s bull-run, and now again in the 2020’s.
The current run in gold vs bonds has actually already peaked following similar scale moves in terms of duration and magnitude as the previous waves.
It may not be a popular or comfortable viewpoint, but the datapoints are steadily lining up. And in the end, contrarian investing is not supposed to feel nice, it usually requires you to take the most uncomfortable position. That’s why you have to be data-driven and evidence-based in your approach so that you can make the move when the puzzle pieces all line up… even if you don’t like the picture.
Markets are always moving - and sometimes, the best move is knowing what works for you.
With Treasury yields, oil prices and rate expectations keeping markets on edge this week, investors are once again thinking carefully about where to position next. There’s no one-size-fits-all choice in investing — and the same goes for Tiger Merch. This month’s hot picks are in, featuring the Tiger Toiletry Bag, Universal Travel Adapter, Tiger Umbrella and more favourites chosen by fellow Tigers.
Explore the Monthly Hot Picks in Tiger Coin Mall, now 12% OFF for a limited time.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
