NEGATIVE INTEREST RATES NORMAL OR A SIGN OF THINGS TO COME?

Gold continued to march higher last week with the price climbing above USD $1500oz at one point, whilst in Australian dollar terms, the yellow metal is now trading above AUD $2200oz, up approximately 25% in the last year.

As we have discussed in previous communications with our members there are no shortage of tailwinds driving demand for precious metals right now. 

H1 2019 figures released by The World Council (WGC) showing

  • Central bank demand rising to over 370 tonnes in the first six months of 2019, the largest H1 increase in global reserves in at least 19 years. 
  • ETF holdings hitting a six year high, now topping 2,500 tonnes, with demand coming from both the United States as well as Europe. 

According to the World Gold Council, who will be presenting at this years’ Gold and Alternative Investments Conference, gold demand totalled 1,123t in Q2 2019, an increase of almost 10% year on year. 

The notable increase in demand for gold is also being seen in Australia with The Perth Mint releasing an update last week which showed that their ASX listed gold product, PMGOLD, having the fastest rate of inflows in 3 years during July. 

This is no surprise given the declines in the Australian dollar which is being pushed lower by falling commodity prices. Iron ore is now off approximately 25% in the last month alone. 

It also seems that barely a week goes by without market commentators making more noise about the RBA needing to cut interest rates further or even start Quantitative Easing. The following headline came from a news article in Business Insider earlier in the week summing up the mood. 

Interest rates in Australia could be headed as low as 0% as the economy sinks.

If rates really are cut to 0% then we would expect to see demand for gold continue to rise. This would bode well for continued gains in the price of gold and silver as well as the companies that explore for or mine the metal out of the ground. We will bring you a number of these opportunities at this years’ conference. 

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One of the more interesting trends to emerge in financial markets in the past few years has been the phenomena of negative interest rates. For years it was something that was either posed as a hypothetical or occurred in a few limited circumstances. All that has changed now with the whole idea of negative interest rates almost appearing mainstream these days.

Not only is the idea becoming more mainstream but it’s being normalised. We are being told that there is nothing that’s surprising about these developments nor any great cause for concern. REALLY!!

This was best captured in the following headline from an article that appeared in Bloomberg Businessweek less than a week ago.

The author of the article was Joe Weisenthal, who is an editor for Bloomberg, as well as being a prolific tweeter who goes by the handle @TheStalwart. 

The article highlights a few recent developments to help illustrate what is going on in the world of interest rates these days noting that;  

  • The German government can now borrow money for up to 30 years and get paid for doing so. 
  • UBS Group AG is thinking of charging some its larger clients a cash holding fee of up to 0.6% per annum
  • In Denmark, in what appears to be a world first a bank is selling a mortgage backed note with a negative coupon

Rather than critique this Weisenthal attempts to normalise the negative interest rate environment we are operating in, arguing that these are perfectly normal developments given the economic landscape we are in. 

We for one don’t agree and find these developments deeply troubling. A further indicator of how out of whack markets are can be seen is in the following chart which shows the price of an Austrian Government bond which matures in 100 years.

As you can see the price of this bond which is supposed to be a low risk, low volatility investment has skyrocketed in the past year. Rising by approximately 80%. It makes very little sense.

Most importantly for investors there will be no easy fix to the mess we have got ourselves into. Gold likely remains the safest best bet both to protect and to grow wealth in the environment ahead.

This years’ Gold and Alternative Investments Conference will help you understand how to protect your wealth

The agenda for this year’s Gold and Alternatives Investment Conference, which kicks off in just over 10 weeks at the Sydney Sofitel Wentworth, is looking fantastic. 

We have presentations from over 20 gold mining companies, including Kirkland Lake Gold, West Gold, Matsa Resources and Evolution Mining. We also have a very interesting list of key-note speakers including;

  • John Mulligan, Head of Market and Member Relations, World Gold Council
  • Daniel Want, Chief Investment Officer, Prerequisite Capital
  • Egon von Greyerz, Founder and Managing Partner, Matterhorn Asset Management
  • Hedley Widdup, Lion Selection Group
  • Barry Dawes, Executive Chairman, Martin Place Securities
  • Keith Weiner, Founder, Monetary Metals
  • Fred Schebesta, Co-Founder, Finder and HiveEx crypto exchange

With the gold price well above AUD $2,000oz, interest rates headed to zero, the currency weak and the economy still in trouble, this is an event you can’t afford to miss. 

The current crazy early bird price is still available click here to access the early bird rate

We look forward to welcoming you at this years’ Gold and Alternative Investments Conference in Sydney

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