Gold Prices vs long-term interest rates?

Discussion in 'Commodity Futures' started by Alizar, Dec 3, 2005.

How do you think the economy is doing?

Poll closed Jan 2, 2006.
  1. Great

    4 vote(s)
  2. Bad

    2 vote(s)
  3. Good for now, but look out ahead

    4 vote(s)
  4. No idea

    1 vote(s)
  1. Alizar


    I realize even Alan Greenspan doesn't know the answers to these questions, but I'm curious what people on here think about them.

    First of all, from what I have seen M3 and the price of gold are pointing toward inflation. Long term interest rates, and CPI/PPI data (if you believe those numbers) on the other hand are saying there is little inflation. Which is it?

    I can't understand the reasoning behind buying a 30 yr bond right now at 4.71%, when you can get a 5yr for 4.44%. Who is buying the 30yr? I know some people are saying that stock market returns over the next few years will likely be lower than they have been recently, are people increasing the amount of bonds in their portfolio? I can't see that happening on a really large scale, especially on the 30yr notes. Are asian central banks trying to prop up the dollar to keep us buying their stuff? I know I saw a site a while ago (can't find the link now) that listed foreign holdings of US treasuries, and it showed that China has not been buying much over the last few months. Or are foreigners investing in US bonds because we have higher interest rates than their countries?

    Where do you think we are headed? What do you think is causing this "conundrum." Most of the news sites are saying the economy is doing great. That may be true for now, but I'm still not convinced it will keep going. Seems to me like the housing market is just starting to come down (don't want to turn this into a housing bubble thread though, I think that issue has been beat to death). Maybe all those dollars the Fed injected to increase M3 went into the housing market and somehow didn't impact CPI/PPI data.