This is what makes a "market": Gold vs Bonds?

"This" is a gap in perception between what makes a buyer buy, a seller sell.

Both parties have one thing in "common": they both take a look into their crystal ball. There ends their similarity for they see a different future. A market is born precisely because both parties see the need to act differently.

This is what is going on in the bond market which sees Deflation and stagnation. A recent posting of mine shows the severe drop in consumer spending. You can read numerous stories about "negative equity" in homeownership and increasing personal savings -- for the first time in some years -- as US households fear for the future.

On the other hand, buyers of gold see huge increases in government spending -- all over the developed world, in US, China and Europe -- as well as money printing. So they forecast inflation ahead. Some like Marc Faber even see hyper-inflation.

Read this for a nice summary of what is going on in this gold/bond dilemma here.