After a blow off move in January, GLT/TLT has been going sideways since then.
As mentioned numerous times, I am more bearish TLT than bullish GLD, but I needed to have GLD just in case the Fed did YCC or something similarly foolish. And in 2024 and 2025, gold has been much the better trade. As is the case with all these relative value trades, the market fell in love with the side that is working - gold and other precious metals. To be fair, they still look to be in an upturn, but back in January every retail trader and fund manager were super long gold, silver and miners.
Gold looks ok, but much more problematically, is has given up a huge amount of relative performance to the S&P 500. That is, holding gold let you outperform the S&P 500 since the beginning of 2025, but you are now down on gold relative to the S&P 500 this year. This year, gold as a bearish trade is not really working.
So should I get rid of gold? Probably not. Gold is reacting to higher interest rates as you would expect. The real mystery is corporate debt. Even with oil up, rates selling off, and private credit not looking great, corporate debt spread remain at lows.
The corporate debt market has learnt to price in a Fed put. And as we have seen, corporates are now borrowing against asset values for capex. That is the Fed put is inflationary. Kevin Warsh and Scott Bessent have spoken against the Fed trying to price everything. If TLT is pricing in a more “free market” Fed - why are equities not? S&P 500 is looking like the mispriced asset here. Fun times.
