What Bonds & Gold Are Saying

From Breakfast with Dave:
If the truth be told, the last time we had the 10-year note yield at today’s level the S&P 500 was trading near 1,060. In fact, at the 666 lows, the 10-year note yield was also exactly where it is today. The bond market sniffs something — more often than not. It rallies from interim highs, as we have seen since April, and foreshadowed something that was not particularly friendly to risk assets months down the road ... July 2007 and February 2000 seem to come to mind.

Then again, this rally has all occurred in a depreciating U.S. dollar environment. Gold is the hardest currency of all and in bullion terms, there has been no bounce-back at all.

Let's look at some charts:

As the chart shows, the 10 year yield is back to where it was in March 2009 at the depth of the crisis.  This fact alone alludes to capital flowing to the lower levels of Exter's pyramid.

The S&P 500 has recovered somewhat.  It is nowhere near the top of close to 1,500.  For 2010, it seems to be stuck in a low volume trading range.

Copper has shown surprising strength, given the weakness of the recovery.  Does this mean it anticipates greater demand from China and the emerging markets or are we seeing the beginnings of a shift in investment, from real estate assets into hard assets (commodities) such as copper and oil as we travel down Exter's pyramid?

Gold has relentlessly moving higher in US dollars and most other currencies.  It has outperformed stocks, bonds, and real estate.  Although it may be due for a pullback to the $1250 level soon, the bull market is clearly established.  The move down the pyramid is becoming clear.

We remind our readers that the world gold supply is very limited. There are approximately 23 grams (2/3rds of a troy ounce) per person in the world.
If central banks and governments continue on their present course, it seems likely that at some point, gold, the currency without a government, will greatly increase its purchasing power.