CROSS-SECTORSECTOR COMMENT 9 August 2016ContactsBenjamin S. Garber 1.212.553.4732 Asst Dir-Economist benjamin.garber@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market CommentBuy Gold and Head for the Hills? Prominent investment managers have soured on bonds and stocks. They view equities as overvalued in light of weak growth and inflation, while also recognizing that debt is offering little yield and is exposed to rate risk. They recommend sanctuary in real assets like gold. However, gold prices have historically shown greater sensitivity to speculative money flows than to economic fundamentals. And bondholders can still find positive returns by shortening durations and taking moderate exposure to credit risk.MOODY'S ANALYTICS CROSS-SECTOR2 9 August 2016 Market Comment: Buy Gold and Head for the Hills?Gold is building momentum As negative and low yielding debt dominate the capital markets to an unprecedented degree, expectations about the value of traditional investments should evolve. The decades-long downward slide in both interest and inflation rates may not have much further to run, which would eliminate and perhaps reverse the positive bond price effects from falling yields.In the face of these challenges and recent record lows for global government bond yields, well known fixed income investors are advising a change in strategy. Bill Gross of Janus Capital has raised concerns in his latest investment newsletter about debt sustainability in the absence of strong income growth. He favors hard assets such as gold and real estate that will maintain value if credit markets malfunction. Jeffrey Gundlach of Doubleline Capital saw little upside and great risk in Treasuries in a recent interview. Gundlach found much greater promise investing in gold miners, where potential returns will stand apart from the market interferen...
