How will Gold fare in a negative interest environment

How will Gold fare in a negative interest environment

Conventional wisdom states that precious metals trend upward when rates are rising. We are living in strange times, and central bankers are breaking rules left, right and centre so this old paradigm might not hold true. If the masses are forced to speculate, they could decide that Gold is a better storage of wealth.  However, for that to come to pass, the average Joe would have to understand the true meaning of the word inflation and that Gold is a currency and not some ancient relic that has no place in the 21st century. This is not going to be an easy feat so, while we expect Gold to trend higher in the years to come, the next bull run is not going to begin with a bang.  Another possibility to consider is that if the cost of holding money in a bank becomes prohibitive, it could trigger a run on the banks. We will examine this issue in more detail in a follow-up article.

Compelling Read: Negative Rates are God send for the Greedy, unscrupulous corporate world

To surmise

Negative rates is an untested experiment, right now the majority of the world is embracing negative rates, the U.S and a few other nations are the only standouts, however, sooner or later they will be forced to take the same path.  Once that is done, any advantage that negative rates conferred will be gone because there will be no major country out there that will be offering positive rates. Hence, the destructive race to the bottom will gain traction as each nation seeks to debase further its currency to get a competitive edge.  In this environment eventually Gold could do well, but for that to occur the masses would have to understand that Gold is a currency; for now they still believe that Gold is an ancient relic.

How does one become a butterfly?” she asked pensively. ”You must want to fly so much that you are willing to give up being a caterpillar.”
Trina Paulus

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