Gold Is On A Tear, And Thanks To Bernanke, It Will Win The Battle Against Treasuries

In case you haven’t been paying attention, gold is on a tear.


Mike O’Rourke of BTIG argues that thanks to Bernanke, gold will continue to outperform.

Gold is screaming inflation and Treasuries are screaming deflation and the irony of that is not lost on us.  We view them both as indications that there is lots of money out there looking for a home but there is still fear related to owning equities.  As usual, we expect such fear to be a positive for equities.  In the interim, it will be good to see the inflation/deflation battle waged in the very strong momentum moves in Gold and Treasuries.  It is highly unlikely that both will simultaneously sustain their current moves.  Some will argue that they both represent flight to quality bids and therefore might both be sustainable.  To refute that one need only remember that Gold’s flight to quality bid post Lehman in October 2008 was quickly erased by a 25% decline in 3 weeks, when deflationary fears began settling in.  This time around we expect Gold to be the victorThe deflationary threat in the economy still lingers, but the Fed’s decision to reverse its exit strategy during its last meeting and conduct replacement purchases of assets will likely continue to keep deflation at bay.

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