Wednesday, 23 May 2012
Gold or Bunds?
All this reminds me of the traditional saying that decries gold bugs:
"Gold has no yield, it can't be an asset class."
So now German bunds are in fact Gold. Those pieces of paper that have been bought this morning have the same inherent value as gold. This is quite an achievement for the Government of Germany. Not only have they managed to get a weak euro but their borrowing rates are also at an all time low.
For Germany today, truly it is a Goldilocks scenario.
Less so of course if you happen to be a citizen of virtually any other European country, but no matter.
So, what do we think, in 2 years time what asset will prove to have been better value:
100 euro of Gold or 100 euro of 0% German bunds.
Gold has been off recently and many are calling the end of the great bull market. On the other hand, the price of these bunds can only go one way in theory. Which would you opt for?