Should I Buy Treasury Bonds or Gold?

Should I Buy Treasury Bonds or Should I Buy Gold?

Treasury bonds have always traditionally been a safe haven to preserve capital - at least up until now. Times are changing - have you noticed? Even something as historically safe as Treasury bonds are starting to look very shaky.

US Treasury Bonds have, for years, been considered the safest bonds or way of saving money in the world. The U.S. government has never, to date, defaulted on a loan. One has always been assured that one will be paid back on US treasury bonds. Also called Treasuries, the interest payments, although extremely low, are exempt from local and state taxes.

Although it is extremely unlikely the US government would default on repayment of Treasury Bonds, the value of putting one's assets into them is now questionable.

In short, long term bonds are going in the opposite direction as gold. While treasury bonds, once the benchmark for asset preservation, are now flat, gold has increased around 25% more than US Treasury Bonds.

The importance of this shows up in the interest rate paid and the value of the dollar as against the value of gold. It may sound simplistic, but the more the value of the dollar decreases the less each dollar is worth. This means the less each treasury bond is worth is based in correlation to the value of the dollar - which is declining rapidly.

This is distinctly different to the value of one ounce of gold.

The spot price of gold is set each day in London and called the "gold fix." This is the price at which members of the London Bullion Market Association (LBMA) will readily sell gold. So, when you ask what the price of gold is now, you are more than likely to get that day's "PM gold fix" price fixed each day at 3 p.m. London time to coincide with the market open in the U.S.

Porter Stansberry of the Stansberry Report stated, "People demand gold when their local currency becomes unreliable. People demand gold for savings during periods of global uncertainty. But most importantly of all, people demand gold when they no longer trust their government… which explains the antipathy between government-backed central banks and gold."

"The prices of U.S. Treasury certificates (especially the long-dated variety) are heavily influenced by inflation expectations. To understand why, you have to remember the coupon payment on bonds is fixed. So if the Treasury issued a new 30-year, $1,000 bond today, at current interest rates, an investor would be paid a coupon of roughly $17.50 every six months. That represents a 3.5% annual interest rate. The bond would be said to trade at "par" at this yield."

Compare this to the value of gold increasing over a 30 year period. From under $100 to over $2,500. A HUGE increase compared to bonds.

To answer the question at hand, buy treasury bonds or buy gold, it seems obvious that an increase as indicated here is far healthier than a loss of a treasury bond investment.

Remember - "take care of your money and your money will take care of you."

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