Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bugs Stop Laughing!

Commodities / Gold and Silver 2012 Jan 13, 2012 - 12:53 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleZero rates are starting to set around investors like concrete...

OWNING GOLD should make financial crises fun. Which alongside silver, it has surely done to date, 20% and 50% plunges aside.


But if you already own physical bullion – or you're about to consider it – spare a thought for everyone else. Because pointing and laughing at the misfortune of others is an ugly habit. It only makes us "gold bugs" more boring at parties as well. A little sympathy, and a stab at empathy too, could go a long way to redeeming us socially. And it would be far better than taking a pratfall of our own, you'll agree.

Crowing about being so right, so early is understandable, of course. Hitting a 22-year low in July 1999, the price of investment gold has since risen sharply – pretty much year after year – against the Euro, Yen and Sterling, as well as every other currency you can name.

Silver bullion has done better still over the last decade – that decade straddling both the Tech Stock Crash and its offspring, the Cheap-Money Bubble, sired by meek academics wielding godlike powers at the big central banks. The permanent emergency following the inevitable blow-up has only accelerated gold's outperformance against pretty much every other financial asset you can name, too.

Source: BullionVault via LBMA, BoE, MorningStar. Includes upfront & ongoing fees.

In most cases, this acceleration of dumb bullion's Schadenfreude has come thanks to its own faster gains, plus the flagging performance of the finest investment minds.

But not in Japan. There, in the land of the zero interest rate, retained savings have grown so used to earning nothing – nothing! – in return for credit or capital risk, that even gold and silver slowed their rate of gain during the last half-decade of permanent emergency.

Since the start of 2007, gold has returned just 8.8% per year to Japanese buyers (compound annual growth rate, after costs). Silver slowed more dramatically still, halving its 10-year CAGR to just 6.1% per year. And all because, of course, the Yen has rallied during this crisis so far.

How come? Japan was long into depression when this "global crisis" began, you'll recall. Its own domestic bubble exploded in 1989, dragging GDP, wages and even shop prices into deflation since. Japan thus got the absurdist joy of zero interest rates almost a decade ahead of everyone else, helping knock the all-too-powerful Yen down on the currency market in 2000-2008 (see above) but still failing to induce the magic reflation.

Come the big bang of late 2008, and the Yen reversed a huge chunk of its fall, as hedge funds (and others) suckered into selling it short by the Bank of Japan's zero-rate gambit realized that every other central bank was about to try the same gag. Gold plunged in Yen, short term, and silver fell harder again. Net-net, both metals have offered the best store of value (barring just two mutual funds) for Japan's household investors. But they've both slowed their rate of return to what, compared to the 20%-or-so annual gains for Dollar, Sterling or Euro investors, looks like a crawl.

Depressed returns to investment are only to be expected in a depression, of course, not least from lumps of metal which never promised a yield in the first place. But even the best stores of wealth – meaning gold and silver since 2002 and especially 2007, in Japan just as much as in the US and Europe – might be vulnerable. Zero growth, and the zero rates through which central banks hope to undo it, are starting to set around investors like concrete.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in