"I can't fathom this chart...would it be better to show gold against 10 yr $ bond PRICES (not YIELDS)?"

Eoin Treacy's view

My comment - Thank you for highlighting this chart which got me thinking about how best to illustrate the relationship between gold and other asset classes.

Yields are generally more suitable for long-term analysis because they give a better representation of what happened and we have longer data series for yields than prices. Long-term charts of prices also tend to have steps in them that represent coupon changes. These do not occur in yield charts. I added the chart of Gold / Treasury prices as you requested. The earliest data for 10-yr Treasury prices is from 1982 but the nominal pattern of outperformance for gold from 1999 onwards is still evident.

A log scale chart of the Gold / Treasury yields chart shows what we might intuitively expect to see with gold outperforming in the 1970s, peaking in the early 1980s, underperforming for nearly 20-years and outperforming again over the last decade.

However both of these charts plot nominal advances in gold relative to Treasury prices and yields. What about the total return, since Treasuries pay a dividend and gold doesn't?

With the aim of depicting a total return ratio, I added the Merrill Lynch 10yr+ Total Return Index to the Chart Library. (Please note: the Index was last updated on August 31st). The resulting ratio chart dates from 1982 and while it continues to show gold's outperformance over the last decade, the advance has been less spectacular. Since the trend remains consistent, we can continue to give the relative upside the benefit of the doubt.

An additional conclusion is that gold underperformed in the disinflationary period from the early 1980s to the early 2000s but has outperformed since as inflationary pressures began to coalesce. Even during the period following the credit crisis when deflation was a more vivid concern than inflation gold has continued to outperform.

Since we often also look at the Dow / Gold and this does not take account of the total return on the Index, I thought it might also be instructive to create Total Return ratios for both the Dow and the S&P so I added the Dow Jones Total Return Index and the S&P500 Total Return Index to the Chart Library. Both ratios continue to trend downwards which continues to illustrate gold's outperformance relative to Wall Street and its secular bull market.