Gyroscopic Investing

Can anyone think of a scenario where gold tanks and LT bonds soar? When the gold bull market comes to an end, will that also signal and end to the bond bull market....similar to how both bonds and gold got whacked in the early 80's? I can imagine a currency crisis causing bonds to tank and gold to soar....but could the reverse happen?

Doodle, didn't gold do badly whilst LTT did very well in Japan in the 1990s. They had a trade surplus giving a strong currency but also had a stock and property market bubble burst.

In Japan, gold was in a long term bear market. My worry right now is that you have both LTT and Gold in huge bull markets. I wonder if the same set of issues is driving both of them higher.

I can think of a currency crisis driving gold higher and LT bonds down, but is there some scenario that would drive gold down and LTT higher?

doodle,

This is tough... I don't think that there is a situation where this will happen.  Theoretically, 2008 could have been that year, but I think 2008 showed that monetary metals are different in that because they're money, they'll respond to economic crises better.

Moda,

So you think that the LTT and Gold bull markets will end at the same time? That will most certainly result in a portfolio loss.

I think that the only thing that could pull them back together would result in a roaring bull stock market, and high hopes for future growth that we are very far from at this point.

I guess, in my estimation, if a new secular bull started with low energy costs and high future growth prospects and a releveraging, you could see gold & treasuries lose 30% of their current value, but I'd be surprised if in that same period (likely a few years at least) stocks hadn't doubled, more than offsetting the the losses of the other two.

So you can see no scenario starting from our situation today where gold drops but LT continue to appreciate in price?

Well, softly... maybe like some kind of long Japan-like malaise and if people decide gold isn't that great...

Gold is tough to peg, but as long as high-unemployment and negative real interest rates persist, I can't see it dropping a whole lot.