Here's why the gold rally may be different this time:
“It’s different this time.” How many times have I heard that phrase uttered when it comes to investing? Rampant IPO speculation won’t turn out poorly in the end? Sure it will. Consumers can spend more and more without having to pay the proverbial piper at some point? Don’t believe it.The big one these days is about so-called “yield curve inversions” and recessions. Historically, one has led to the other.
You see, not everyone buys bond to hold them. The bond market, which is vastly larger than the stock market, is full of different types of investors. Some, such as pension funds, may be forced by their mandates to buy government bonds with some of their portfolio assets. It doesn’t matter what the yield is.
So, as in times of panic, it was easy for investors to choose bonds over gold. After all, wouldn’t you always like to get some interest on your money while you wait for your panic to subside? This time, however, the yield on bonds is so close to that of gold that I suspect investors will look at it differently. They will want to allocate their “fear” money to where there is some profit potential.
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