GOLD prices hit record high, Treasury Yields remain low

Gold prices touched record intraday high of $1718.02 per ounce today. US downgrade by S&P from AAA to AA+ has left investors thinking where to invest when the strongest currency of the world has become less reliable to invest.

gold_201188

Gold prices would also have been affected by European Central Bank’s decision to but Italy and Spain Government bond which means more debt and concerns about the currency. Europe seems to be in no mood to come out of sovereign debt crisis and any news of further debt concern will only help gold’s dream rally.

With most of the bigger advanced countries reeling under sovereign debt crisis and lack of financial stability emerging economies, investing in a particular currency may no more be the intelligent thing to do. This leaves investors with no better option than the GOLD which has been the most reliable investment asset historically.

Prices of gold may still rise further as the uncertainty in financial markets continues. According to CNNmoney’s Aaron Smith, 

Gold is also still far from its true peak, when adjusted for inflation. Gold hit its real record on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation to 2011 dollars, that translates to an all-time record of $2,261.33 an ounce.

While the Gold prices took a flight due to downgrade, the treasury yields remained low. Low treasury yield is also an indication that there is not much room for investors to move their money into any other country and US happens to be the safe heaven even after this downgrade.

US bond_10 year yield_201188

S&P has also cautioned that it may downgrade many Asian countries too where the government debt situation is not improving after 2008 meltdown. These countries are India, Japan, Malaysia, Taiwan among others.

There have been questions on S&P ratings, did they get the numbers right? Moody has said it will not downgrade US soon. Legendary investor Warren Buffett has said he believes in US and gives it quadruple A rating. 

Hitesh Anand

I am a post graduate from Newcastle University, UK. I like studying and analyzing economic data and financial health of world.

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