I came across an interesting chart yesterday from Elliott Wave International that I thought I would share with you. On December 12th, 2008, we published an article titled “The American Bond Bubble and the Future of Gold,” advising our readers that the American Treasury market had reached a point of “incremental euphoria” and that a collapse in prices was eminent. Likewise, we declared that the future of gold was as bright as ever, and that investors should up their purchases of the precious metal, and maintain as small a position in dollar denominated debt as possible, including cash reserves.
Although one can seldom time major market peaks/bottoms, in retrospect, it appears that we may have really nailed this one. As you can see in this chart plotting 30-year US Treasuries, yields have been steadily increasing since mid-December of 2008, now surpassing pre-crisis levels. We do not believe that this is a temporary trend, and cannot conceive of a scenario under which long-term yields would return to or break their December lows for decades to come. In fact, given the massive debt issuance by the Treasury, along with the simultaneous monetization of debt by the Federal Reserve, it is far more likely that the dollar will be replaced before Americans ever see long-term interest rates like these again.