이자율 상승과 금값에 대한 오해 (계명성)

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이 글은 이자율이 상승하면 금값은 하락한다는 대부분 투자자들의 상식이 잘못된 것임을 1970년 이후 미국 국채 이장율과 금값과의 관계를 통해서 설명하고 있습니다. 이자율이 상승하면 주가가 하락하고, 투자자들이 대안투자를 모색하면서 금시장으로 투자금이 유입되면서 금값이 상승했다고 주장합니다.

이 글은 8월 22일 zealllc.com에 게재되었습니다. 번역할 시간이 없어 먼저 원문을 올립니다. 오늘 저녁부터 틈틈이 번역할 생각입니다.

이자율 상승과 금값에 대한 오해

Gold Rising-Rate Fallacy

Adam Hamilton     August 22, 2014  

Gold has slid during this past week on mounting fears of interest-rate hikes.  Between the latest FOMC meeting’s minutes and the Fed’s annual Jackson Hole Economic Policy Symposium, American futures speculators’ rising-rate phobias have been whipped into a fever pitch.  They worry gold will be crushed when the Fed eventually starts normalizing rates.  But history shatters this fallacy that rising rates are gold’s nemesis.

지난 주 이자율 인상에 대한 두려움이 증가하며 금값이 하락했다. 최근 연준 공개시장위원회 회의록 공개로부터 잭슨홀에서 열린 연례 경제정책심포지움이 열리기 까지 미국 선물 투기자들의 금리인상 공포가 열풍처럼 확산되었다. 이들은 연준이 결국 금리를 정상화하게되면 금값이 하락할 것이라고 겁을 먹고 있다. 그러나 역사를 뒤돌아 보면, 이자율 상승은 금값의 적이 아니라는 확실히 알 수 있다.  

Today there is a near-universal belief among futures traders that rising interest rates are very bearish for gold.  The underlying logic is simple.  When interest rates rise, so do yields on bonds and cash in the form of money-market funds.  This makes bonds and cash relatively more attractive to investors than gold, which yields nothing.  Therefore they jettison their gold holdings to migrate capital back into bonds and cash.

선물거래자들은 이자율 인상이 금값에 대단히 부정적이라고 보편적으로 인식하고 있다. 그 같은 이식의 저변 논리는 대단히 단순하다. 이자율이 상승하면 자금시장에서 채권과 현금의 수익률도 상승하게 된다. 그러면 투자자들은 이자가 없는 금보다는 채권과 현금을 선호하게 되고, 이들이 보유한 금을 매도하고 채권과 현금으로 투자금을 이동시키게 된다는 것이다. 

While this thesis may seem sound on the surface, it should be tested rather than being blindly accepted as truth.  The financial markets are littered with popular notions that later prove dead wrong.  And even the sophisticated gold-futures speculators are not immune.  Late last year they scared themselves into a full-blown hysteria over the nearing start of the Fed winding down its massive QE3 bond-monetization campaign.

이 논리는 외견상 그럴듯하지만, 맹목적으로 옳다고 받아들이기 앞서 먼저 검증해볼 필요가 있다. 금융시장에는 인기있는 개념이 나중에는 엄청난 오류로 밝혀지는 경우가 허다하다. 금 선물투기자들이 대단히 치밀하지만 그들이라고 예외는 못된다. 지난해 말 선물투기자들은 연준이 조만간 QE3 축소를 시작할 것이라고 엄청나게 겁을 집어먹고 있었다.   

So they dumped gold futures in droves leading up to that dreaded event, as the mere threat of it in June 2013 battered gold to its worst quarter in 93 years.  Yet the very next day after the Fed started its QE3 taper in December, gold bottomed and hasn’t looked back since.  Within less than 3 months, gold had surged 16.2% on heavy buying despite ongoing tapering.  Conventional “wisdom” in the markets is often mistaken.

The winding down of QE3 was a one-time event, totally unique in history since the Fed had never done such a gargantuan open-ended bond monetization before.  That made it impossible to test, leaving the contrarians out on a limb betting that QE3 tapering wouldn’t prove to be gold’s apocalypse.  But rising rates are far different, having happened many times in history.  We just have to see how gold performed in them.

So this week I built a big spreadsheet including nearly 45 years of daily gold-price and interest-rate data.  For rates I used the benchmark yields on both 1-year Treasury bills and 10-year Treasury notes, in order to represent both the short and long ends of the yield curve.  The result was fascinating, shattering the popular notion today that rising rates are gold’s nemesis.  That is a total fallacy proven false by history.

The past half-century or so has seen two mighty secular gold bulls interrupted by a great secular gold bear.  Gold soared in the 1970s and again in the 2000s, but drifted sideways to lower for the intervening decades in between.  And during the third of a century since the early 1980s, interest rates have been falling on balance as represented by these benchmark US Treasury yields.  This is an exceedingly-old trend.

Right away in this high-level strategic overview, the notion that rising rates are bearish for gold and the necessary opposing corollary that falling rates are bullish for gold starts to crumble.  During the mighty 1970s secular gold bull, which dwarfs today’s so far, gold surged while interest rates were rising.  And then in the 1990s gold slumped while interest rates were falling.  There are plenty of other similar episodes.

So American futures speculators’ staunch conviction today that gold and rates have a strong negative correlation simply isn’t true.  The proof is not just visual, but statistical.  Over this entire massive span, gold’s correlation with 1-year and 10-year Treasury yields merely ran -0.525 and -0.509.  Multiply these by themselves to get each of their r-squares, and they weigh in at merely 27.5% and 25.9% respectively.

This means that only 28% and 26% of gold’s daily price action over the last 45 years was mathematically explainable by changing interest rates!  That’s only a quarter, stunningly low in light of today’s universal belief that gold’s fortunes are slaved to rates.  Thus nearly three-quarters of gold’s price action over our lifetimes had nothing to do with changing interest rates!  They are a minor secondary gold driver at best.

Yes, gold’s current secular bull unfolded in a falling-rate environment.  But so did gold’s multi-decade secular bear before that.  Interest rates’ impact on gold prices is far more indirect and nuanced than the simplistic up-is-bearish interpretation popular today.  Gold prices are dominated by global investment demand.  That, not interest rates, is what investors and speculators must focus on to multiply their wealth in gold.

When the world’s investors want gold, they move capital into it which drives up its price.  Depending on the magnitude of those capital inflows, this can lead to anything from a single-day rally to a decade-long secular bull.  And when gold falls out of favor with investors, their selling forces its prices lower.  The interest rates only materially affect gold prices indirectly through their impact on global investment demand.

And since rates have been falling on balance for a third of a century, the last time we saw a secular rising-rate environment was the 1970s.  If American futures speculators are right today, gold should have been obliterated then.  With yields on bonds and cash high and rising, why would anyone bother holding zero-yielding gold?  But instead of crumbling, gold enjoyed its strongest secular bull in modern history!

Interest rates rose consistently throughout the 1970s, as the benchmark yields of 1-year and 10-year Treasuries reveal.  And rather amazingly, gold actually had a strong positive correlation with both yields over that entire secular rising-rate span!  Its 1-year and 10-year daily price correlation came in way up at +0.797 and +0.910, for r-squares of 63.6% and 82.8%.  That is really high and totally contrary to expectations.

Gold was strong in 1973 and 1974 as rates rose, weak in 1975 and 1976 as rates fell, and actually soared in 1979 as rates surged!  Is this what’s in store for gold during the coming first secular rising-rate environment since the 1970s?  Markets are forever cyclical, and after rates fell on balance for a third of a century they are certainly overdue to rise on balance for at least a decade if not longer.  Higher rates are inevitable.

So why did something so radically counterintuitive based on conventional wisdom happen during gold’s last secular bull?  If investors and speculators can wrap their brains around this, they will realize that rising rates pose little threat to gold today.  Provocatively, just the opposite is true.  Rising rates may very well prove to be an exceedingly-bullish force rekindling vast amounts of global gold investment demand.

This heretical assertion hinges on gold being one of the leading alternative investments.  These are defined as assets that are not the traditional dominant three of stocks, bonds, and cash.  When stocks and bonds are thriving, investors have no need to look for alternatives.  But when stocks and bonds roll over into bear markets, alternatives really start to shine.  And gold has long been the king of that realm.

Rising interest rates are actually extremely bearish for stocks and bonds!  As rates rise, yields on bonds including “risk-free” Treasuries climb.  This makes bonds relatively more attractive compared to stocks, especially for those seeking income.  And because Wall Street usually includes interest rates when measuring stock-market valuations, higher rates make stocks look more overvalued which leads to selling.

So as rising rates weigh on stocks, reducing investor demand for them, alternative investments look a lot more attractive and return to favor.  If the stock selling feeds on itself enough, cyclical bear markets can form.  They tend to cut stock prices in half over a couple years or so.  And that’s exactly what happened in 1973 and 1974.  During those two years, the flagship US S&P 500 stock index (SPX) fell by 41.9%.

So investors looked for alternatives, and flooded into gold.  Their buying blasted it up 186.4% in 1973 and 1974 while short rates were surging and long rates were rising!  Even though 1-year and 10-year Treasury yields averaged jaw-dropping by today’s standards levels of 7.8% and 7.2% over those couple years in the mid-1970s, investors still didn’t hide out in cash or pour vast sums into bonds.  They wanted gold.

Cash wasn’t popular despite high yields because it was far-underperforming gold.  Why earn 8% or less in a money-market fund when gold was blasting up 60%+ annually?  Even if that number was just 15% a year, it still trounces cash.  The same thing will likely happen in the next rising-rate environment.  Will a 3% money-market yield, which seems unattainably high today, prove more attractive than gold itself?

Very unlikely.  Since its secular bull was born in April 2001, gold has enjoyed a compound annual rate of return of +12.8% as of this week despite being relatively low and out of favor today.  Compare this to the S&P 500’s mere +4.2% over that same secular span even at today’s euphoric records.  When the stock markets roll over again, gold should have no problem easily achieving annual gains of at least 15%.

And just like in the 1970s, rising rates are likely to be a major driver of stocks’ next cyclical bear.  Ironically the same is true with bonds.  Higher yields do attract new bond investors, but only if those yields are stable.  Why?  Bond prices move inversely to yields.  As rates rise, the prices of all existing bonds drop as sellers force them to lower levels to make their existing fixed coupons equal current market yields.

The bond markets have enjoyed one of the biggest and longest secular bulls ever witnessed over the past third of a century because rates fell on balance.  But when rates start rising on balance, bond prices are going to fall for as long as rates rise.  That means all investors who can’t hold every bond to maturity, including bond funds, are going to watch the principal value of their bond portfolios relentlessly drop.

They won’t want anything to do with bonds if their yields don’t handily exceed this erosion of their capital invested.  Imagine the Fed hikes rates far enough to see long Treasuries yielding 7%.  That is almost inconceivable after years of the Fed’s zero-interest-rate policy.  If Treasuries yield 7% but bond investors are losing 5% a year in principal, their net gain is just 2%.  That won’t even keep pace with inflation, of course.

So if bonds are falling and stocks are falling, why not buy gold which will be gaining double digits again year after year?  Alternative investments thrive, investment demand for them soars, when traditional stock and bond markets are weak.  And nothing pushes stock and bond prices lower more effectively and relentlessly than rising-rate environments.  Rising rates are likely to drive capital into gold like nothing else can.

Gold was weak in 1975 and 1976 as rates fell, losing 27.8%.  Why?  Because the SPX shot 56.7% higher in a new cyclical-bull bounce out of the preceding cyclical bear.  But soon after the stock markets stalled again in 1976, gold caught another bid.  It continued powering higher in 1977 and 1978 despite rates rising relentlessly, especially on the short end of the yield curve.  And both rates and gold soared in 1979.

When rates rise fast, not only does their potential downside impact on stock and especially bond prices accelerate, widespread inflation fears are kindled.  And neither stocks nor bonds do well in periods of high inflation, but of course gold thrives.  So if the markets wrest control of the upcoming rate rise away from the Fed, sharply higher rates are far more likely to push more capital into gold than pull money out of it.

Many traders today believe high rates killed the secular gold bull of the 1970s, but the truth is once again more complex.  In less than 6 months between August 1979 and January 1980, gold skyrocketed 200.4% higher!  Seeing any already-high price triple in such a short span of time is the hallmark of an unsustainable popular mania.  After such a parabolic climax, gold’s bull was due to fail regardless of rates.

Bond demand didn’t surge again until rates stabilized, until investors finally believed that their principal invested would be relatively safe.  And even if those ultra-high rates prematurely killed gold’s bull, way up above 16% on the short end and nearing 14% on the long end are radically above anything we are going to see in the coming years.  Gold thrived in the 1970s up until 13% in both 1-year and 10-year terms.

Today’s secular gold bull that was stealthily born in 2001 happened in a far-different environment, highlighting that rates are only a secondary gold driver.  Over the past 13 years or so, long rates have fallen on balance while short rates have only materially risen one time.  And contrary to futures speculators’ outlooks, gold rallied while short rates surged and rallied with long rates far higher than today’s.

Since early 2001 the correlation r-squares of gold with 1-year and 10-year yields have been 43.8% and a high 76.3%.  Both are based off of negative correlation coefficients.  But with rates falling on balance while gold rose on balance over this span, a negative correlation was inevitable.  Focusing on that high-level relationship exclusively masks the true performance of gold in high and rising-rate environments.

Between April 2001 and August 2011, gold’s latest secular-bull high, this metal powered 640% higher.  This compares to a horrendous 2% loss for the SPX over that same span, by the way.  But during those prime secular-gold-bull years, 1-year Treasury yields averaged 2.24% while 10-year Treasury yields averaged 4.09%.  This is 22.4x and 1.7x higher than today’s levels respectively, or many rate hikes higher!

So if gold thrived so incredibly while rates were far higher, why on earth are rising rates perceived as a threat to gold at all as long as they remain below 5% or so?  That was the upper range of 10-year yields during gold’s secular bull, and even of 1-year yields.  And between mid-2004 to mid-2006, the Fed was on an aggressive tightening cycle.  It catapulted the federal-funds rate that it directly controls from 1.00% to 5.25%!

This was a monstrous increase in a short period of time, far more extreme than what the uber-dovish Yellen Fed is expected to do in the next tightening cycle.  If American futures speculators are right that rising rates are a mortal threat to gold, it should have been wrecked during that last sharp tightening.  Yet this metal actually surged 56.4% higher over that 2-year span where short rates effectively quintupled!

If gold’s secular bull was strong in far-higher rates than today’s, and gold powered higher during the last steep rate-hike cycle, it seems pretty silly for investors and speculators to fear the next round of rate hikes today.  Gold and everything it drives including the flagship GLD gold ETF, silver, and the stocks of the precious-metals miners are likely to thrive during the next rate-hike cycle as general stocks and bonds get hammered.

And for several reasons, the Fed’s next rate-hike cycle is likely to be exceedingly gradual.  The Yellen Fed has telegraphed this, and stock traders universally expect it.  If the Fed hikes rates too fast, it will risk spawning a panic-like selloff in the topping and dangerously overvalued US stock markets.  And fast rate hikes risk igniting cascading bond selling too, which would rapidly catapult rates up out of the Fed’s control.

The Fed will also do everything in its power to slow the rise in rates because of the extreme US federal-debt levels.  Merely normalizing short and long rates to long-term averages would literally bankrupt the United States government!  Soon interest expenses to service Washington’s enormous debt would expand to eat up all discretionary government spending.  There is no way the Fed will risk destroying the US government.

Contrary to popular belief, rising rates are no threat to gold.  This metal soared in the 1970s during the last secular rising-rate environment as stocks and bonds got hit.  Gold powered higher again in the 2000s with both short and long rates far higher than today’s levels.  And gold surged during the only major modern rate-hike cycle seen a decade ago, when the Fed more than quintupled short rates.

Prudent investors and speculators study history to test popular opinion, as emotions often cloud the collective judgment of traders.  What would you rather rely upon to grow your capital, someone’s mere belief or the evidence from history?  American futures speculators are dead wrong today that the Fed’s coming rate-hike cycle is a mortal threat to gold.  The weight of evidence strongly supports the bullish contrary view.

Sadly contrarians are hard to come by, very few people are willing to fight the herd and suffer ridicule to buy low and sell high.  Yet that’s where fortunes are made, buying things like today’s precious metals that are cheap and loathed and then later selling them when popularity returns.  That’s what we do at Zeal.  We study the markets and share our valuable contrarian research in acclaimed weekly and monthly newsletters.

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The bottom line is the popular notion that rising rates crush gold is totally false.  Gold rocketed higher in the 1970s when both short and long rates were already very high and rising.  And gold soared in the 2000s when rates were far higher than today’s.  It even surged during the Fed’s last major rate-hike cycle a decade ago, which was quite sharp.  Rising interest rates are not gold’s nemesis, and not even a real threat.

Rising rates actually help alternative investments.  They weigh on overvalued stock markets, sucking capital out of them.  And they steadily erode bond investors’ precious principal.  As stocks and bonds fall, investors pour capital into alternatives.  Gold leads this category.  So as the Fed’s coming rate hikes start popping today’s stock and bond bubbles, global gold investment demand and hence gold prices should thrive.

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