Negative Interest Rates Could Put More Glitter into Gold
What could this trend of negative interest rates mean for gold? The chief precious-metals analyst thinks that gold might really start to shine.
The world's central banks are toying with negative interest rates, which aren't generally a sign of robust fiscal health. According to James Steel, who is the chief precious-metals analyst for HSBC, the largest bank in the UK, since this trend is a sign of significant uncertainty, buyers are starting to turn to gold, and with good reason.
" Looking at the previous four Fed tightening cycles, gold prices have weakened going into them, but then rallied over the first 100 trading days after the first hike. While we seem to be well into this period, given that rate hike expectations continue to be pushed into the future (HSBC economists expect the next hike in June), we expect the rally may last longer than it has historically."
This deflationary period is doubtlessly causing massive global concern. The Negative Interest Rate Policy (NIRP) is a unique strategy designed to act as an economic defibrillator. No more cash sitting in idle accounts; banks are loaning left and right in the desperate attempt to trigger the deflation pendulum to swing towards inflation and growth. So far, Denmark, Japan, Switzerland, Sweden, and the European Union Central Bank have implemented this policy. Distressingly, the Federal Reserve is flirting with enacting it in the U.S.
Can anyone reasonably predict anything but miserable failure?
Because investors won't back bonds when their yields are plummeting, gold is becoming one of the few reasonable assets. When monetary systems begin to crumble, gold has proven to be the only currency that maintains global trust. Even if the market remains volatile, gold nonetheless has the potential to remain a hot commodity, as Chinese buyers continue an almost hysterical buying trend.
To learn more about how purchasing gold can help you achieve financial security during this period of global economic turmoil, contact us for a consultation today.