MSN Money: Negative Interest Rates Could Impact Gold

Release Date: 
Friday, April 24, 2015

Gold and Silver Prices
Despite a weaker dollar, gold prices were lower this week and continuing signs of a weak economy.

“The gold price reversed earlier gains in Friday morning trading despite a weaker dollar and higher oil prices providing commodities with a boost... Gold is currently failing to benefit from a weaker dollar, which is tracking back after weak data released in the previous session…US weekly unemployment claims increased to 295,000 in April, higher than the forecast 288,000. US new home sales for March, meanwhile, came in at an annual rate of 481,000, which was 11.4 percent below the prior month’s reading and missed the 514,000 forecast. Still, the lack of volatility in the gold market follows a quiet Asian session, with participants appearing sidelined ahead of news from Greece and Tuesday’s FOMC meeting.” (“Gold Price Steady, Failing To Benefit From Weaker Dollar,” Bulliondesk, 4/24/15.)

Gold finished the week --- down $22.90, closing at $1,181.40. Silver prices closed the week at $15.86, down $0.47.

MSN Money: Negative Interest Rates, Currency Reset Could Send Gold to $9,000
MSN Money discussed how a negative interest rate environment could ultimately lead to a “currency reset” and gold prices topping $9,000 per ounce.

“Did I blink or have the yields on German bonds just gone negative this week? That means after inflation bondholders are losing money. Holders of gold, on the other hand, have just seen record prices in euros. Gold does not pay any interest but it won’t cost you anything to hold either, so prices look set to go up and up.

“Gold is one of the few asset classes that performs well in a deflationary economic environment and that is where the global central banks seem to be taking us next. Printing money is apparently having the reverse of the intended effect and lowering price levels and not causing inflation…

Gold is likely to make a comeback as a currency and not just as a commodity in such an environment. And because gold reserves are very limited and its price already elevated then silver will rise and rise an alternative precious metal as it did in the past.

“Indeed, we are heading for a currency reset as the huge debt mountains of the world become due, cannot be paid and debtors default. The International Monetary Fund could well have no alternative but to include gold in a basket of global currencies in a reset…

“But at what value would gold be valued if that happened? Hedge fund manager and author Jim Rickards has calculated a range of between $9,000 and $12,000 an ounce. Gold at around $1,200 today is a steal!” (“Negative real interest rates are heaven for gold prices with $9,000 to $12,000 an ounce in an IMF currency reset,” MSN Money, 4/20/15.)

Gold Prices to “Catch Fire”: Cooper
Peter Cooper, Editor and Publisher of the financial website ArabianMoney explained why investors should acquire gold now.

“Should you be stocking up on gold bullion now or waiting to see if the price correction ever reaches the miraculous 50 per cent expected by the chartists? As ever there are no sure answers but the risk-reward ratio is stacked in favor of buying bullion now and riding out any further correction, if it actually happens…

“But let’s look more closely at what is happening in global financial markets right now… First up, Asia looks like the next shoe to drop. Chinese stock markets have doubled in the past year during an economic slowdown because debt-fuelled speculation has shifted from the toxic housing market to equities. The authorities have just pricked this bubble with a clampdown on margin lending.

“Where will Chinese retail investors go to next? Gold is about the only other option that they have, and they’ve been the world’s biggest gold buyers in recent years. That sounds excellent news for gold prices from here.

“Secondly, the European street theatre that is the Greek debt tragedy is coming towards its inevitable conclusion. A big shake-up in the eurozone financial system will put $200 on the gold price easily.

“Third, the US recovery is stalling before our eyes… Long gold bullion…looks a winning trade for the week ahead.” (“Gold prices about to catch fire as global financial markets tumble?”, 4/19/15.)

Gold Set for Epic Run
Value oriented investment manager and researcher Ned W. Schmidt, CFA, explains why gold is poised for an “epic” bull run.

“The state of the global gold market has returned to the conditions it faced in 2007, when the precious metal was poised just ahead of robust multi-year gains, according to commodities newsletter publisher Ned Schmidt.

"Imagine you could go back in time so you could buy some investment at a bargain… Since we know what happened, which of us would not again buy gold? Well, you are in luck...

"Why might that be the case? One possibility is that individuals, who tend to be value oriented, realize that gold is cheap given the reckless monetary policies of Western nations and the extreme risks now existing in the geopolitical sphere," he explained.

“China may have accumulated a giant gold stash as a tool to help it challenge U.S. global financial dominance, Bloomberg reported. The People's Bank of China might have tripled its gold holdings to 3,510 metric tons since 2009, according to Bloomberg Intelligence. The U.S. stockpile is the world's largest and is estimated at 8,133 tons.

"’If you want to set yourself up as a reserve currency, you may want to have assets on your balance sheet other than other fiat currencies,’ Bart Melek, head of commodity strategy at TD Securities, told Bloomberg. Gold is ‘certainly viewed as a viable store of value for an up-and-coming global power.’" (“Ned Schmidt: Gold Is at the Levels It Hit Just Before Its All-Time Epic Run Higher,” Newsmax Finance, 4/24/15.)

Gold to Rally to $1300 in Q2-2015- TD Securities
TD Securities has targeted $1300 gold in the second quarter of 2015 due to weakness in the U.S. economy and Greece’s potential exist from the Eurozone.

“Analysts at TD Securities says that consistently weaker data will force the Federal Reserve to push back the liftoff of potential interest rate hikes until later in the year, which will be positive for gold as the metal trades in a narrow range around $1,200 an ounce. ‘The combination of U.S. economic growth concerns along with the rising risk that Greece will default on its debt obligations in the coming months, should see gold rally to highs near $1,300/oz sometime in Q2-2015— monetary policy trends, safe-haven buying should prompt specs to cover short exposure and build new longs, with technical positioning providing the path to the higher target….’” (“U.S. Growth Concerns and Geopolitical Risk Should Push Gold to $1,300 – TDS,” Kitco, 4/21/15.)

China Seeks Global Trade and Finance Dominance with Gold
China’s push to challenge U.S. dominance in global trade and finance may involve gold -- a lot of gold. While the metal is no longer used to back paper money, it remains a big chunk of central bank reserves in the U.S. and Europe. China became the world’s second-largest economy in 2010 and has stepped up efforts to make the yuan a viable competitor to the dollar. That’s led to speculation the government has stockpiled gold as part of a plan to diversify $3.7 trillion in foreign-exchange reserves…

“’Gold has always been, through the history of China, a way to project power,’ Kenneth Hoffman, a metals and mining analyst at Bloomberg Intelligence, said in an interview on April 9. ‘They are thinking about how to make the yuan more international, and so this is a possible reason why they are buying so much gold.’” (“The Mystery of China’s Gold Stash May Soon Be Solved,” Bloomberg Business, 4/20/15.)

American Advisor Week In Review
Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program: Do you know the primary factor effecting this week's market? Listen to the American Advisor now.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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