• 742 days Will The ECB Continue To Hike Rates?
  • 742 days Forbes: Aramco Remains Largest Company In The Middle East
  • 744 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,144 days Could Crypto Overtake Traditional Investment?
  • 1,148 days Americans Still Quitting Jobs At Record Pace
  • 1,150 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,153 days Is The Dollar Too Strong?
  • 1,154 days Big Tech Disappoints Investors on Earnings Calls
  • 1,155 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,156 days China Is Quietly Trying To Distance Itself From Russia
  • 1,157 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,160 days Crypto Investors Won Big In 2021
  • 1,161 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,161 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,164 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,164 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,167 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,168 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,168 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,170 days Are NFTs About To Take Over Gaming?
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

A Train Wreck in the Bond Markets

Why investors, fearful of currency depreciation, have turned to gold...

Not so long ago, everyone seemed to think Greece was about to leave the Euro.

Well, it hasn't. Yet.

And remember when Spain's government was only days away from requesting a formal bailout?

Well, it hasn't. Yet.

Never underestimate the power of Europe's politicians to press the slow-mo button on the single currency car crash.

But how long can all this go on? Things are getting worse, not better. As FT Alphaville reports, Greece is facing another potential default next week, while Spain's auction of 5-Year bonds this week was described by one trader as "awful", with a wide range of bids suggesting little market consensus on how the bonds should be priced. Reuters reports that this was the first time in 18 months that Spain has tried to sell longer-term bonds.

Take a look at the following chart from the Spanish Treasury, showing the maturity profile of Spanish government debt. See the big spike for 2013?

Spain's debt is piling up at the short end. In a video recorded earlier this year, BullionVault founder Paul Tustain likens this phenomenon to a train wreck in the bond markets, with government debt piling up against the buffers until that government is either forced to default, or a devaluation of the debt is orchestrated with central bank assistance - for example with interest rates held below inflation for a sustained period.

Of course, devaluing debt means devaluing currency itself. This is where gold comes in.

Many investors worry that their currency will fail to hold its value. Many of those have turned to gold. At the time of writing, gold in Euros is within 1.5% of its all-time high set last month. For gold priced in Dollars, the gap is closer to 10%, from a high hit over a year ago.

Why the discrepancy? Because the crisis is more intense in Europe, that's why. The value of the Euro is under far greater scrutiny.

Many investors believe the Dollar will one day face a similar test. Some of those have added gold to their portfolio. To find out why, set aside twenty minutes or so and watch Paul's video from the beginning.

 

Back to homepage

Leave a comment

Leave a comment