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Gold/Mining/Energy : Gold & Gold Stock Analysis -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (66)	8/20/2003 9:49:44 PM
From: Little Joe	Read Replies (1) \| Respond to of 29622

I think the rationale is that the fed can control short term rates artificially and obviously there is a "normal" spread between short term rates and long term rates to compensate for the additional risk the long term buyer undertakes. If a long term bondholder is greatly concerned about inflation they will demand a premium in interest rates to compensate for the additional inflation. This makes sense because the 30 year bond is bought in today's dollars and paid in dollars 30 years from now. Of course inflationary expectations are an important consideration, which can cause gold to rise also. So I don't think it is so much a matter of the steep yield curve causing gold to go up or vice versa, but the fact that one of the main components causing the steep yield curve (i.e. inflation) also puts upward pressure on gold. Little joe