Backed by the full faith and credit of the federal government, U.S. Treasuries bonds have long been viewed as the gold standard in safe investments.
In times of uncertainty, economic downturns, or full-blown crises, investors have flocked to Treasuries as a haven. But what if actual gold is the new gold standard for a safe investment?
Analysts at Bank of America asked that question in a note on Wednesday, explaining that the outlook for U.S. debt is bullish for the precious metal.
With debt as a share of GDP set to break record highs in the coming years, the Treasury Department has to sell more and more bonds to investors, who may demand higher yields. And when yields rise, the price of bonds on the secondary market falls.
That has helped weaken the historic correlation between bond yields and gold prices. While lower rates are still bullish for gold, which doesn’t pay interest or dividends, higher rates don’t necessarily put pressure…
