Gold Safer Than U.S. Treasury Bonds As Federal Debt Soars

Backed by the full faith and credit of the federal government, U.S. Treasury bonds have long been considered the gold standard in safe investments.

Is gold becoming the new gold standard for safe investments? 

In times of uncertainty, economic downturns, or crises, investors have typically turned to Treasuries as a haven.

But what if actual gold is becoming the new gold standard for safe investments? Jason Ma explored this question in a report for Fortune. Analysts at Bank of America raised the question in a recent note, explaining that the outlook for U.S. debt is bullish for the precious metal.

With debt as a share of GDP set to reach record highs in the coming years, the Treasury Department will need to sell more bonds to investors, who may demand higher yields. As yields rise, the price of bonds on the secondary market falls, weakening the historic correlation between bond yields and gold prices.

While lower interest rates have traditionally been bullish for gold, which doesn’t pay interest or dividends, higher rates no longer necessarily put pressure on bullion, according to Bank of America.

The firm maintained its gold price target at $3,000 per ounce.

"With lingering concerns over U.S. funding needs and their impact on the Treasury market, gold may become the ultimate perceived safe haven asset," analysts wrote. Gold prices have surged over 30% so far this year, surpassing $2,700 per ounce for the first time last week.