The Compass portfolio checks one signal every morning before deciding whether to hold gold: the yield on the 10-year US Treasury bond. A yield is simply the annual interest rate the US government pays to borrow money for 10 years. Today that rate sits near 4.69 percent, up sharply from six months ago, while the 30-year Treasury (a 30-year loan to the US government) briefly touched 5.19 percent, its highest point since 2007. Rising yields are one of the most important inputs to the portfolio decision, and they triggered a question worth explaining in full: is there a level where bonds become so attractive that selling gold makes sense?
The answer comes from Maurice Allais, a French economist and Nobel Prize winner who spent decades studying monetary systems. His insight was that gold and long-term government bonds are fundamentally competing assets. Gold pays no income. You hold it because you expect the currency to lose value over time, so the metal protects what you have. Government bonds pay fixed income. You hold them because you believe the government will honor that payment and that it will keep its purchasing power in real terms. The two assets are in a constant contest. When bond yields are low, gold wins because bonds offer almost nothing for the risk you take. When yields rise high enough, bonds win because you are finally being paid enough to accept the inflation risk built into a fixed payment.
Allais formalized this with a specific threshold: when the 10-year US Treasury yield exceeds roughly 5.9 percent, he argued, the income from government bonds becomes high enough to justify switching from gold into long-term Treasuries. Below that level, gold remains the more sensible store of value. Above it, the government is paying enough to make the switch worthwhile.
The Compass portfolio uses this rule explicitly. Every morning, the yield is compared to 5.9 percent. If it crosses, the plan is to rotate the gold position into long-term Treasury ETFs (funds that hold US government bonds as a basket). If it does not cross, we hold gold.
Today, with the 10-year yield near 4.69 percent, the portfolio is roughly 1.2 percentage points away from the trigger. That gap is meaningful. A 1.2 percentage point rise would be a significant move by any historical standard. But what matters as much as the gap is the direction. Yields have been climbing for weeks. If that continues, the Allais threshold comes into view. If yields stabilize or fall, which sometimes happens when fear spikes and investors rush into bonds as a safe haven, the gold thesis remains fully intact.
The deeper reason the Compass holds gold today goes beyond the Allais rule. It comes from the broader framework of economist Charles Gave, who argues that the United States is in a late-stage dollar cycle: fiscal deficits so large that the government cannot raise rates enough to stop inflation without breaking the economy. In that environment, the real return from bonds (the return after subtracting inflation) stays negative even when nominal yields are high. The Allais threshold of 5.9 percent was calibrated for environments where raising yields actually restores positive real returns. Until that happens, the hard-money thesis stays intact and gold remains the right hold.
What would change this: the 10-year yield crossing 5.9 percent AND inflation simultaneously falling toward 2 percent, meaning real bond yields turn strongly positive. That combination is the full Allais trigger. Watching the nominal yield alone is not enough. The portfolio watches for both, every day.