New York, NY, July 4, 2016 – Profit Confidential (www.ProfitConfidential.com), an e-letter put out Lombardi Publishing Corporation, a 30-year-old consumer publisher that has served over one million customers in 141 countries, says the adoption of negative interest rates in North America could send gold prices to $2,000 an ounce.
“In an effort to kick start their local economies, more and more central banks are adopting negative interest rates. Here in the U.S., there is growing concern the Federal Reserve will need to adopt negative interest rates to combat the fragile economy,” says economist and lead contributor Michael Lombardi. “In fact, in May, Federal Reserve Chair Janet Yellen left the door open to the possibility of negative interest rates. That is the sort of catalyst that could send gold prices to $2,000 an ounce.” (Source: Harrison, D. “Yellen, in Letter, Does Not Rule Out Negative Interest Rates,” The Wall Street Journal web site, May 12, 2016; http://www.wsj.com/articles/yellen-in-letter-does-not-rule-out-negative-interest-rates-1463089914.)
Gold has been one of the best performing investments in 2016; it’s up 25% to around $1,330 an ounce. By comparison, the S&P 500 is down -0.5% in 2016. And there is still a lot of upside for gold in 2016. That’s because the yield on 10-year U.S. Treasuries has been in a downward trend since 2006 and currently stands at 1.6%—near its historic low. After the Federal Reserve’s dovish comments, U.S. Treasury yields could be headed even lower.
“‘Negative yield’ means that if you hold a bond until maturity, you are guaranteed to lose money. At the very core, negative interest rates mean money will be worth less tomorrow than what it is worth today,” Lombardi adds. “To give some perspective, $8.3 trillion worth of global government bonds have negative yields.” (Source: “Govt bonds with negative yield hit record high $8.3 trln -JP Morgan,” reuters.com article, June 13, 2-16; http://www.reuters.com/article/markets-bonds-jp-morgan-idUSL8N19515W.)
Japanese government bonds with maturity rates of less than 10 years have negative yields. German government bonds with maturities of 10 years or less have negative yields. In France, bonds with maturities of six years or less have negative yields. And 30-year Japanese government bonds have a yield of just 0.22%.
“So what is the value of money if it depreciates? That is the real question. And maybe that’s why gold prices are taking off this year. With the cost of living increasing and the value of money decreasing, there are few alternatives for investors who want to invest their capital and not see the value erode,” Lombardi concludes. “But gold fits the bill, especially shares of quality gold-mining companies. Given the number of central banks around the world that have adopted negative interest rates and soon could, gold prices will continue to rise. And we may be looking at gold in the $2,000- to $2,500-an-ounce range.”
Founded in 1986, Lombardi Publishing Corporation is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.lombardipublishing.com/.