At this point, ‘flight to safety’ still means ‘buy US Treasuries’ – as people buy treasuries the yield drops
Brian Bloom (Australian analyst who publishes some sound articles) points out that as the yields on the US Treasuries drop it becomes less and less attractive for foreigners to invest in the US – there are better interest rates being paid in other parts of the world
Lower rates on 10 year Treasuries typically mean lower interest rates on mortgages so in the short term the dropping yields are probably a good thing for US consumers – from a macro perspective the declining yields increase the speed at which foreign money is going to leave our country
I think we will increasingly see ‘flight to safety’ include the precious metals – right now, some of the hot money (think hedge funds – 8000 of them) invested in the precious metals can be forced into selling their precious metals positions in order to cover other losses (they have to sell something that has a bid and right now none of their garbage paper has an acceptable bid) – this dynamic can cause the precious metals to drop when a ‘flight to safety’ perspective would expect the metals to increase in price
