Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Negative Interest Rates Positively Driving Gold Demand

  by    0   0

More than half the world’s sovereign debt now carries negative interest rates, and data keeps coming in confirming that it is driving demand for gold.

A couple of weeks ago, CNBC reported central bank action appears to be rejuvenating gold in Europe, as the entrenchment of negative interest rates makes depositing cash in banks less and less rewarding. Now we have hard data reported by Bloomberg confirming a similar spike in Japanese gold demand since that country’s central bank plunged interest rates into negative territory earlier this year:

Gold sales surged in Japan through March after the country’s move to set negative interest rates sent investors scurrying for a shelter, a further sign that global central bank policy of keeping borrowing costs low or below zero is stoking demand for bullion. Bar sales climbed by 35% to 8,192 kilograms in the three months ended March 31 from a year earlier, Tanaka Kikinzoku Kogyo K.K., the country’s biggest bullion retailer, said in a statement Thursday.

The surge in gold purchases since the Bank of Japan’s interest rate move comes on top of a significant increase in demand last year. Consumer demand for the yellow metal almost doubled to 32.8 tons in 2015, up from 17.9 tons a year earlier.

negative rates

More than half of the world’s sovereign debt now carries negative interest rates. The European Central Bank, Denmark, Switzerland, and Sweden, along with Japan, all currently have negative interest rates, and there is no sign that they will rise any time soon. Janet Yellen has even said that the US Federal Reserve will consider negative rates if economic conditions dictate:

Potentially anything – including negative interest rates – would be on the table. But we would have to study carefully how they would work here in the US context.”

The World Gold Council recently released a report on gold in a negative interest rate environment, highlighting two important points:

  • Gold returns in periods of low rates are historically twice as high as their long-run average
  • Investors may benefit from increasing their gold holdings up to 2.5 times, depending on the asset mix, even under conservative assumptions for gold.

Simply put, the report recommends to buy gold:

Looking forward, government bonds are likely to have limited upside, due to their low-to negative yields and, in our view, would be less effective than gold in mitigating risk, ensuring portfolio diversification, and helping investors achieve their long-term investment objectives. Portfolio analysis suggests that gold allocations in a low rate environment should be more than twice their long term average. We believe that, over the long run, negative interest rate policy may result in structurally higher demand for gold from central banks and investors alike.”

As SchiffGold Precious Metal Specialist Dickson Buchanan pointed out in a recent article, as opportunities for yield in the marketplace decrease, investors have to consider the adverse effects of being charged a negative yield to play it safe in the bond market. In such an environment, non-yielding assets, which at one point looked unattractive, begin to look much more attractive compared to negative yielding bonds – and gold is the largest non-yielding asset in today’s financial markets.

Precious metals also provide the opportunity to protect your wealth while maintaining complete privacy. You just need to understand the rules. The SchiffGold Guide to Tax-Fee Gold & Silver Buying makes it easy. Download the free report HERE.

TaxFreeGold.Banner.1000x285

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

The Outlook for Gold in 2020 Remains Bullish

Gold had a strong year in 2019 and a World Gold Council report says the outlook for 2020 remains bullish. We expect that many of the global dynamics seeded over the past few years will remain generally supportive for gold in 2020.” Gold charted its best year since 2010 last year. The price increased by […]

READ MORE →

Spending Us Into Oblivion: Federal Budget Deficit Tops $1 Trillion in 2019 Calendar Year

The US federal government ran a budget deficit of over $1 trillion in the 2019 calendar year. It was the first budget deficit over $1 trillion in any calendar year since 2012 — in the midst of the Great Recession. The budget shortfall from January through December totaled $1.02 trillion, according to the latest report issued […]

READ MORE →

Holdings in Gold-Backed ETFs Grew 14% in 2019, Hit All-Time Highs

Net inflows of gold into gold-backed ETFs came in at 400.3 tons in 2019, according to data released by the World Gold Council. ETF gold holdings grew by 14% last year and finished at 2881.2 tons. Overall, global gold-backed assets under management grew by 37% in US dollars due to positive demand and an 18% […]

READ MORE →

Central Banks Continue “Remarkable” Gold-Buying Spree

Central banks continued their remarkable gold-buying spree in November and remain on pace to eclipse 2018’s near-record purchases. According to the latest numbers from the World Gold Council, central banks added 27.9 tons on a net-basis to official gold reserves in November. That brings the yearly total for 2018 with one month left to calculate […]

READ MORE →

A Shocking Numbers of Americans Live Paycheck to Paycheck

We’re told that this is the greatest economy in history. Stock markets are surging. Unemployment is low. And yet despite the good times, a shocking number of Americans live paycheck to paycheck. Several surveys cited by MarketWatch reveal the precarious financial situation many Americans find themselves in. This is less than ideal in an economy […]

READ MORE →

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Call Now