3 Min. Gold News – Negative Interest Rates & Just Desserts – February 4, 2015

3 Minute Gold News

A Quick Read for Busy People


Negative Interest Rates
Gold as Insurance

gold-coin-in-moss.jpg

 

 

Physical gold is an insurance policy against uncertainty.

It doesn’t pay you a dividend like a stock, and you have to pay to have it stored safely.

So if you own more than can be slipped under a mattress or buried beneath the oak tree then there’s a cost to keeping it.

So it doesn’t seem like a good short term investment.

The thing is, none of us is sure what’s going to happen right now.

Global powers are fighting, and in the currency part of the fight each country’s central bank is cutting interest rates to beggar their neighbour’s exports, and practicing QE, which prints currency backed without gold or anything of intrinsic value as insurance.

That’s not even counting the uneasy Cold War between East and West which is hinting at going hot.

Printing QE debases whatever currency you have. The QE goes to banks and powerful players in the game, while everyday citizens see each dollar buying less and less goods. It means hard assets become more valuable and progressively harder to buy.

Eurozone governments and Japan have begun auctioning bonds with a negative yield. That’s a new twist in the game of Coins and Crowns.

With negative interest rates, the only person who would get involved would be someone who is guessing they will lose a profit on the interest rate but gain it somewhere else.

It’s a risk. It’s more like speculating than investing, and not really for those who aren’t incredibly studied in what’s going on and what’s likely to happen. Even those players are caught off guard, as we just saw with Switzerland de-pegging from the euro.

What does ‘negative yield’ mean?

Usually you buy a bond at one price and redeem it later for a higher price, and pocket the profit.

Who would be willing to buy something knowing they’re losing?

How about the ECB?

Here’s the game. If interest rates go even lower, then the yields on the bonds become more negative, meaning the price of the bonds rise. You’ll lose in the long term on the interest, but in the short term you earn some capital gains.

It’s new to bonds, but it’s been done with the housing markets, where all the profit was a shutterstock_83444527gamble on someone else buying that second, third or fourth home as the prices were climbing. The housing market kept climbing, so if you were quick about it you could buy and not worry that the rent paid to you wasn’t covering the mortgage — you made your profit by selling at a higher price.

It all crashed when there was no one left with the ability to take another mortgage. The last investor holding the house lost — and defaulted on the bank loan.

Like musical chairs from hell.

Or a lemon meringue pie in the face instead of on a plate for dessert.

That whole pie cliche was originally funny because it was unexpected. We trusted a baker to give us something yummy. Pure safety. Who would expect it’s white smocked creator to push it in our faces and leave us embarrassed and hungry?

Now the meme is no longer funny because we see it as an option and look out for it.

That’s the game with negative interest. Who would expect a central bank to throw a pie in your face?

The currency wars are being done for any kind of advantage against both allies and foes. It’s just another part of the uncertainty, and a shutterstock_99664604way to try to gain a smidgen of profit as the whole monetary system is careening down the hill towards a cliff.

Gold isn’t subject to that kind of risk.

It’s in your hands and doesn’t have third-party risk, another way of saying it doesn’t depend on some crazy central bank policy or the whims of a frenzied or fearful government or free market — nevermind a manipulated one.

Gold isn’t meant for great short-term profit — it’s meant to insure you against great long-term loss.

It’s lemon meringue pie for dessert while a snowstorm is brewing outside.

 

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Thoughts on Today’s Headlines:

Gold is $1,261.90 US per ounce via Kitco

Screen Shot 2015-02-04 at 8.00.04 AM

 

 

 

 

 

Corporate Bonds Have Their First Ever Negative Yield via Zerohedge

Thanks to Nestle, it’s not just government bonds — chocolate is the new gold, or rather lemon meringue pie.

 

Gold and Silver Headwinds: Lower Mining Costs via Seeking Alpha

Mining costs are trending lower in general, which means short-term lower gold and silver prices. The recent cut back in exploration and development due to the lower gold and silver prices means that in the long-term there will be less gold available which will raise the price.

It’s a repeating cycle, and just good to be aware that in general, without geopolitical events causing a flight to gold, that short-term lower prices and long-term higher prices is the normal thing going on right now.

For us, it just means it’s a good time to purchase some soon while it’s lower.

Gold Imports by India Said to Surge This Year as Curbs Scrapped via Bloomberg

India scrapped a rule that required gold importers to export 20% of their shipments back out in international sales, in order to boost the country’s overall exports. Sales of gold have surged in India since then, so people think that the demand will keep increasing, especially towards August – October during their festival season.

Gold Rebounds as China Cuts Bank Reserve Requirements via Hard Assets Investor

The Bank of China just cut its reserve requirement and banks now only have to keep 19.5% cash as a reserve, meaning they can lend more money. This stimulates the economy, so some say, by allowing more people to get into more debt. China’s economy has slowed way down, and their wealth product ponzi scheme has reached it’s limit, with endless empty cities built for the sake of having somewhere to put the people’s money, without sales to show profit.

 

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Davinci's Vitruvian Man is the Golden Ratio

Davinci’s Vitruvian Man is the Golden Ratio

 

 

Artists know patterns using visual and musical ratios and fractals, and see everything in a closed system goes through four seasons.

We’re coming into a global economic winter, to be followed by a glorious spring with new technologies and opportunities.

Hold a little silver and gold, and a little currency  — in case of snow.

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AlbumCover.PreparingfortheFall

 

Preparing for the Fall is a boutique live solo album available on iTunes — includes the singles Wag the Dog, Black Swan Dive, Miss American Pie and Gods of the Copybook Headings.

 

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Wag the Dog (Drums of War and Backroom Banker Passes)
words and music Elaine Diane Taylor
© 2014 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes

Coins and Crowns
words and music Elaine Diane Taylor
© Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

Single featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.

 


The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
©2014 Intelligentsia Media Inc.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes

Another Week on Wall Street (Naked Short Selling and Fiat Currency)
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes

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Nothing on this site is investment advice. Each of us does their own research and makes their own decisions on which way the wind is blowing.

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