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« Even If Pressured, Gold Won’t Fall Below $1,150 in 2016 - GFMS | Main | US dollar slides after Federal Reserve speech »
Thursday
Mar312016

Gold in a world of negative interest rates 

Negative interest rates double gold returns 

We have entered a new and unprecedented phase in monetary policy. Central banks in Europe and Japan have now implemented Negative Interest Rate Policies (NIRP).

The long term effects of these policies are unknown, but we see discouraging side effects: unstable asset price inflation, swelling balance sheets and currency wars to name a few. Amid higher market uncertainty, the price of gold is up by 16% year-to-date – in part due to NIRP.1 History shows that, in periods of low rates gold returns are typically more than double their long-term average.

Looking forward, government bonds are likely to have limited upside, due to their low-tonegative 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 (see page 4). 


read more....

 

An interesting read but the correlation is a bit of a stretch in my humble opinion.

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