Bond yields, which move opposite of prices, have fallen to historic lows. Ten-year Treasuries have dropped to 1.87% -- proving that investors' appetite for such securities haven't waned much, even as S&P warns that the U.S. is no longer the safest of borrowers.
Investors aren't too worried about inflation
The flock to bonds also signals that investors aren't very worried about inflation, says Cetin Ciner, finance professor at the University of North Carolina in Wilmington. This partly explains the fall in gold, which is often used as a hedge against steadily rising prices.
"It's very hard to predict where prices could go, but ultimately the fundamentals are not there," says Ciner, who has done extensive research on the gold market. "It's not the safe investment that people thought it was. It has actually become very dangerous right now."
Prices have fallen below gold's 200-day moving average
When gold falls below the 200-day moving average, investors typically take notice. Last week, for the first time in two years, the precious metal fell below the average of $1,615 an ounce and is currently trading at $1,613 an ounce. Though this hasn't led analysts to call a bear market, Boston University finance lecturer Mark Williams says investors should take the development as a "wake-up call."
"The next resistance level is $1,500," says Williams, a former trading floor executive. "If gold drops below this floor, it is further proof that the bubble, which peaked in September at more than $1,900, has begun to burst."
Gold beats platinum
And then there's platinum, a precious metal that also has industrial uses. Historically, platinum trades at a premium of $100 or more over gold. But that shifted in August when gold neared its most recent peak. Williams points out that this is another indicator that gold prices are inflated. At current platinum prices of $1,400 an ounce, gold could fall to $1,300 or lower, he says.
