Bonds Beat Stocks, But Gold Price Beats Bonds

GOVERNMENT BONDS are beating the returns paid by stock-market shares by the widest margin since 2001 according to Merrill Lynch data – but the Gold Price is outpacing them both.

"While the MSCI World Index of 24 developed countries fell 9.5% including dividends in the first half of 2010, bonds gained 4.2%," Bloomberg reports, "reversing the 5.1 percentage-point lead stocks had over debt during the same period in 2009."

The Gold Price, meantime, rose by 11.5% in US Dollar terms. Paying nothing in yield, but acting as a "safe haven" throughout the global financial crisis to date, the Gold Price rose more than 30% vs. the Euro between New Year's Day and the end of June.

"I've been telling people for a couple months, you are going to discover the joys of a zero percent money market rate," says Howard Simons, a strategist at fixed-income and brokerage specialists Bianco Research – an advisor to more than 300 institutions worldwide.

"[US government debt] is the best-looking horse in the glue factory," reckons Carl Kaufman, manager of the $960-million Osterweis Strategic Income Fund, also quoted by the San Francisco Chronicle.

But "I buy gold [because] I don't know what else to buy," says Swiss wealth manager and investment author Marc Faber, telling CNBC that government bonds risk a glut of supply.

"I think US Fed, ECB and other central banks have no other option, they will continue to monetize and buy bad paper, period. The central bankers are precisely the ones that don't know that excessive money creation and excessive debt creation leads to a crisis down the road."

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