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Long bond ten year note yield can surpass 8% from the current 3% - Gold price confirms
Where can the long bond (ten year notes) go from here? With US trade deficit shrinking rapidly, there is less urgency for Asia especially China to buy US Treasury. The rest of the world is also concerned that that US will eventually default on its loans. It will not happen right away but can happen as early as end of 2012.
The long bond yields are in a tough zone for now. The current yield for ten year notes hover around 3%. It may rise back to 8% or above very soon. The very long-term chart patters (50 year) show interest rate bottoming process. The gold price around $1000 an ounce just confirms a total collapse in US bond market with skyrocketing yield.
The lag between gold price and bond yield varies on the bubbles in the economy. US economy had bubbles after bubbles that proved to be unsustainable. The current bubble is in Government’s borrowing and spending. The gold price is telling the world that Obama will make US broke soon with careless spending. The US politicians have used social security funds, Medicare funds, the annual budget deficit as credit limit less credit card accounts with no care for future interest rates.
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