Would anyone care to comment on the low-low-low bond interest?

[golfguru]

US Treasury long term/medium term/short term, are all selling at historically low rates. To me that is a significant sign of deflation coming our way.

But then why are precious metals inflating? Did they inflate during the last great deflation of 1930's?

These divergences are ominous looking.

[Davis_X_Machina]

1. London afternoon gold fix

...for the last century, plus. Not in constant dollars, though.

Similar, in constant dollars, last 30 years or so.

[muriel_volestrangler]

2. Both are 'safe havens', and are thus increasing in price

Remember, the low rate of government bonds means a high price for them. If a bonds pays, say, $2.50 a year and was trading at $100, the rate was 2.5%. If the price goes up to $110, the rate goes down to 2.25% - because the $2.50 is constant.

So I don't think this is a 'divergence'. Stock prices are going down; people expect the dividends on them, or the future potential for them, to decrease. Stocks are becoming less popular, and government bonds and precious metals more popular.

[golfguru]

4. point taken but if everything is going down such as houses, stocks,

why not just hold on to cash? If we are headed for an honest to goodness
deflation/depression, who is going to support high prices for Precious Metals?

[muriel_volestrangler]

5. Bonds still pay some interest, so they're better than cash unless the US govt defaults

Those holding them think that the chances of default are low enough that the interest is better.

As for precious metals; I don't know exactly what the thinking behind buying them is, apart from expecting others to continue to buy them so that the price continues to increase. Or, if you think that the dollar will decrease in value, then it is a way of getting out of the American currency without having to get into a specific foreign currency (though I would have thought there are mutual funds that invest in international bonds that would achieve the same thing). High prices for precious metals are supported by the world, not just the US, so if you think the US will be worse hit than average, metals could make some sense. If you really think the entire US economy will be ended, and there will be no such thing as a 'dollar' in the future, then gold is also a transportable commodity that someone might accept as payment for something. But I doubt there are that many international buyers who are that pessimistic.

[golfguru]

6. 3 reasons gold is inflating..

1. China inflation is picking up, so Chinese people are net buyers.
2. India inflation is already on a high plateau. Indians are one of
the largest buyers of gold.
3. There are 100 ads every day on my TV telling me to buy gold for various reasons....that has to have an effect.

So there we have the 3 largest countries in the world buying gold. I expect
gold to reach $2300/oz which would equal the previous high inflation adjusted.

[golfguru]

3. This article is scaring the sh...t out of me...

http://slopeofhope.com/2011/08/interest-rates-suggest-2008-was-just-the-kick-off.html

[roamer65]

7. People are running to Treasuries because of our reserve currency status.

They are running to the best of a bad lot, as we continue to devalue.

Gold is the better bet.

Did gold go up in the 1930's?...yes. We devalued from $20.67 to $35 oz in 1933, when we switched to the gold exchange stardard.

The reason we went off the outright gold standard was there was a run on our gold reserves as people lost confidence in the markets and banks. People usually run to harder forms of money in times of great crisis.

[bemildred]

8. The relation of interest rates to inflation/deflations is vastly over-stated.

Also, our monetary and market systems are both highly manipulated and gamed, so expecting the unfettered operation of economic cause and effect is somewhat unrealistic.