The other ‘safe haven’

Never was there a more conflicting or confusing graph than that below.  Whilst gold and silver are widely regarded as a safe haven in times of economic or geopolitical upheaval, so too (traditionally) are treasuries or government bonds.

When people are concerned about protecting their wealth, demand for treasuries goes up and so does their price, and correspondingly down goes their yield.  So why is the yield dropping on 30 year US Treasuries at the same time as shares are increasing (supposedly a sign ‘all is good’)?  For a start we’ve spoken before about the direct correlation between money printing and the share price, and whilst since tapered, it is still happening and apparently still working.  Also large publicly listed companies are using the cheap money available to buy up their own shares hence reducing the number of outstanding shares and hence increasing their price in response and making it look like ‘all is good’.  So there seems to be a growing number of people prepared to buy treasuries at yields barely above or even below the rate of inflation to protect their money at the expense of growing it.  Last week German treasuries dropped below 1% yield!

The problem with treasuries is you still have the counterparty risk of that government paying you back and limited prospects of capital gain.  In gold and silver you have a safe haven that is at low prices (not high like Treasuries), that presents no counterparty risk, and the prospect of considerably more capital gain.