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Profit Confidential (www.ProfitConfidential.com) an e-letter of Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, says negative interest rate policies introduced by central banks around the world, could send gold prices to $1,900 an ounce.“On Tuesday, February 16, the Bank of Japan’s negative interest rate policy came into effect, highlighting the country’s lack of options when it comes to spurring growth as global markets weaken,” says economist and lead contributor Michael Lombardi. “Negative interest rates are supposed to boost lending by commercial banks, which in turn, is expected to spur economic growth. But that clearly isn’t happening.” (Source: “Bank of Japan launches negative interest rates,” The Guardian web site, February 16, 2016; http://www.theguardian.com/business/2016/feb/16/bank-of-japan-launches-negative-interest-rates-yen-markets.)
The European Central Bank (ECB) has lowered its overnight deposits three times since June 2014, most recently to -0.3 in December 2015, and recently signaled it could unveil additional stimulus measures in March. Sweden’s central bank launched its negative interest rate policy, which currently stands at -0.5%, in July 2014. Denmark’s central bank has a negative interest rate policy of -0.65% and the Swiss National Bank has a negative interest rate policy of -0.75%. (Source: Shotter, J., “Mario Draghi says ECB ready to act to boost eurozone,” Financial Times web site, February 15, 2016; http://www.ft.com/intl/cms/s/0/12a883f2-d3e6-11e5-829b-8564e7528e54.html#axzz40LqQ9pGn.)
“Negative interest rates mean paper money is not really worth anything. After all, negative interest rates mean you are being punished for holding on to it,” Lombardi adds. “Typically, you would expect to see gold prices climb significantly higher as interest rates go negative, but this isn’t happening. Back in 2011, gold prices hit $1,900 an ounce because the global economy was moving towards lower interest rates.”
Lombardi explains that despite more and more central banks introducing negative interest rates, gold prices—up 9.0% this year—are not climbing as quickly as expected, especially when compared to how oversold a gold bullion has become and the growing reality of negative interest rates.
“Last year, 2015, was a year in which stock prices built a major top, and gold prices put in a major bottom. In 2016, the pressure is building, and gold prices will start to climb as stocks start to crater,” Lombardi explains. “The fact is that negative interest rates are great for gold. As China further lowers its domestic interest rates to deal with its slowing economy, the Federal Reserve pulls back on its promise to raise rates in 2016; and as more global central banks adopt a negative interest rate policy, gold prices could be in for a banner year.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. More information on Lombardi Publishing Corporation can be found atwww.LombardiPublishing.com.
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