When Will The Gold Slump End? For the sixth day in a row, Gold futures seem to be heading down as opposed to up due to fundamentals working in its favour.
If Americans think that buying treasuries and bonds will give you a good return, they are a risky investment itself and here's why.
Unlike your high interest banking account or guaranteed investments, the bond yield doesn't change when interest rates go up or down.
For example, if you purchase a ten year bond with a $1,000 face value and a coupon rate of 5%, the bond yield per year is $50.
If the market rate changes, your bond yield stays the same.
As a result, if the market rate goes up, the value of your $1,000 bond will go down, which is called a "Bond Discount".
If the market rate goes down, the bond value will go up, called a "Bond Premium".
The changing market rates is why bonds are not a good investment.
Another thing to consider is that companies whom issue bonds or other forms of Debt Financing have tax advantages as interest is tax deductible, meaning the bond rate will actually be lower, known as the "After Tax Cost of New Debt".