Money & Markets - Savers Beware: Real Yields Hit New Lows - But That's Great for Gold

June 24, 2020

Article by Matt Badiali in Money & Markets

Savers beware: U.S. “real” yields are at a new low. And while that’s bad for cash, it’s the recipe for a gold bull market.

The “real” yield, is the U.S. 10-Year Bond yield minus inflation. So how much would your money be worth in 10 years invested in a U.S. bond? Turns out, you’d lose money, -0.6% to be exact.

I remember receiving a $50 savings bond for winning a poster contest in the fourth grade. Today, by the time I went to cash it in, it would only buy me $49.40 worth of stuff.

That’s why gold looks like a fantastic position today. It stands to benefit as the dollar continues to languish.

The Gold Bull Market Is On

If you look at a simple, two-year chart of gold, you can see it’s in a bull market

On the back of these historically low yields, the gold price is near a nine-year high. However, what few investors realize is that the gold price actually beat the S&P 500 over the past three years.And it will do so again in 2020!

If you bought an ounce of gold in June 2017 and an equivalent amount of the S&P 500, you would be up 40% on your gold position and just 27% on your S&P 500 position.

Similarly, if you invested in both on Jan. 1, 2020, you are up 15% in gold and down 4% in the S&P 500.

The price of gold will eclipse its 2011 high, possibly by the end of 2020. Imagine how high it could go over the next two years. So, if you don’t ...

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