Yes TLT is a long duration US Treasury Bond ETF (it holds 20+ year US treasuries).
It's probably not 100% fair to compare gold with TLT on a value basis because gold doesn't pay a coupon/dividend whereas TLT does (which makes TLT slightly better value as time pass), but it's the closest proxy I can think of.
I too invest in gold miners on the basis that in time investors faith in the credit worthiness of bonds/central banks/governments will diminish - but as that chart shows the recent global jitters and stock market sell offs has not seen funds flow to gold at any greater magnitude than long duration US treasuries.
The big money in the world still sees US treasuries as being the deepest, most liquid and safest asset class.
That belief won't change quickly, but I suspect its rate of change will begin to accelerate in the coming months and years.
That said, I don't believe we can see gold rally to new highs in USD terms until that the ratio in the second chart has well and truly reversed.
Then it will be like Ernest Hemingway wrote in one of his books:
'How did you go bankrupt?' Bill asked.
'Two ways,' Mike said.
'Gradually and then suddenly.'
I'm both glad and saddened to see the recent rally in gold...
Make me think we may have begun the "gradual" phase of the realization that many individuals/households/companies/institutions/nations are bankrupt.
Which from an investment standpoint I've profited extremely well from over the last 12 months, but from a social standpoint it is saddening to think of the pain and heartache that will potentially be caused if the system is forced into a reset.
That said, I suspect it will take quite a bit longer than many who are bullish on gold expect before we enter the "suddenly" phase.
The positive now is that while we wait many of these gold mining companies at these gold price levels will be producing quite decent FCF. So I'm very happy to wait (more time to accumulate)...
: )
MML Price at posting:
54.0¢ Sentiment: Buy Disclosure: Held
