NIRP is the Fuel that Will Rocket Gold to $5,000 or Higher
By: Graham Summers
GoldSeek.com
Monday, 3 October 2016
For decades, the primary argument by Warren Buffett and other financial elites for not owning gold was that “gold doesn’t pay you anything.”
Once the ECB took interest rates to NIRP in 2014, this argument became null and void. In a world in which bonds are charging you to hold them, gold with its ZERO yield has become attractive as an investment.
Yes, we have reached the point at which NOT getting paid is considered an advantage for an investment.
One NIRP cut was bad enough, but the ECB has since engaged in three more. And the Bank of Japan got in on the action too in early 2016.
As a result, today, some $13+ TRILLION in bonds are posting NEGATIVE yields.
Globally the sovereign bond market is roughly $40T in size. This means that 1/3 of global sovereign bonds are posting NEGATIVE yields.
Put another way, Gold is now more attractive than 1/3 of the sovereign bond market from an income perspective.
And now we get to the worse news.
Any reduction in NIRP will only make this situation worse.
If the BoJ or ECB were to raise rates (thereby moving them to closer to positive) this would force bonds to fall and yields to rise.
This would potentially mark the end of the current bond bubble.
Investors have been piling into bonds to front-run Central Bank QE programs. This has spun finance on its head with investors now buying bonds for capital gains and stocks for income (dividends no matter how small, are better than being charged to hold bonds).
The Rest…HERE
