NEW YORK ( TheStreet) -- After a tearing run, gold and 10-year treasury notes are off their highs over the past week, as investors regain an appetite for risk that has cooled demand for the traditional safe havens. A degree of confidence has returned to the markets, with better news from the Euro zone and optimism about earnings performance for the second quarter. Investors appear to be shifting to riskier assets and taking profits in gold and treasury notes. Gold prices have declined about 4% in the past three weeks. The popular gold ETF SPDR Gold Trust ( GLD) has lost about 2 tons in recent trading sessions on selling pressure. Meanwhile, yields on 10-year treasury notes have once again inched beyond 3% as bond prices declined. Recent buyers of these assets are now wondering how long the correction will last. But the bigger question as sovereign debt crisis fears ebb is which of the assets make a better investment as the focus shifts back to the U.S. economy. Both assets attracted safe-haven investors concerned about the European debt crisis. But their long-term performance would likely be determined by inflation expectations, an issue that divides gold bulls and treasury note investors. Gold prices rise when inflation expectations are high, while investors buy treasury notes when they expect deflation or a prolonged period of low interest rates. Naturally, only one of these two factions can be correct, which is why the simultaneous rally in gold and treasury notes is not expected to last. Thus, last week, in light of all this, we asked readers of TheStreet the question: Gold versus Treasuries: What's your pick? The result was surprisingly decisive.
A 60% majority said they would pick gold, because the U.S. will print too much money, stoking inflation. Some 22% said they would buy treasuries because they feared the economy was heading for a double-dip recession, and the remaining 18% said they would buy both gold and treasury notes because they felt they were safer investments than stocks. In recent weeks, Asian central banks have been hiking interest rates on inflation concerns. Fears of a double-dip recession in the U.S. have also waned and more money has flowed into Treasury Inflation Protection Securities, suggesting that inflation expectations are slowly rising and that the rally in 10-year treasury notes might stall. Meanwhile gold bulls are using dips to buy more of the yellow metal and are anticipating it to rise to $1,300 an ounce. Gold might outshine treasuries yet. -- Reported by Shanthi Venkataraman in New York. Follow TheStreet.com on Twitter and become a fan on Facebook.