A while ago I wrote about an article I read back in January of this year in the Financial Times. It was written by Merryn Somerset Webb and was entitled “Negative Yields Are Everywhere“. Initially it was the title of the article that drew me in. The reason being is that through my time working in banking, finance, business, and wealth preservation, I have seen the interest rate return on deposits guaranteed and not guaranteed shrink from the high single digits and low double digits respectively to near nil. Now we have the negative yield.
Will A Negative Yield Be The New Normal? Not For Gold.
There is a whole generation of Americans that are now of working and investing age and they have never seen a bank Certificate of Deposit that paid 8 1/2% or Christmas savings club that transferred a set amount every month to an interest-bearing account that became available near the holiday. Will the next generation think negative yields are the norm?
The current American generation has grown up in a world where taking $20 cash out of your checking account has always cost you at least two dollars. But perhaps more on that later, back to Webb and her article, because perhaps I was too harsh in my criticism.
In hindsight, perhaps I can better clarify the realities surrounding owning gold and silver, and why trying to apply parameters and newfangled market thinking to a time-tested and monolithic currencies such as gold shouldn’t be done. And you should not apply negative yield terminology to gold , either.
A Short Video About The Role Of Gold As A Currency.
The fact isn’t lost on me that for decades now financial advisors and bankers have been saying that since gold does not guarantee a return, and because gold does have a cost to store, gold can be seen as having a negative yield and is therefore a poor investment.
Gold Acts As A Currency, Not A Negative Yield Financial Instrument.
One tenant of ITM Trading’s belief that you should own gold, and take physical possession of your gold (unless you place your gold inside of a gold backed IRA), is that because owning gold removes all counter-party risk (Counter-party risk is the risk you assume when you allow a third party such as a bank or insurance company to decide whether or not they will pay back your investment or deposit) because gold truly functions as a physical currency and not a financial institution investment product designed to produce a profit for the bank that created it.
With “today’s increasingly odd financial environment”, as Webb put it, becoming more and more based on higher and higher debt, and requiring ever-increasing values in the stock markets and bond markets, having physical gold coins and/or gold bars and a hefty stash of junk silver is more like having financial wealth insurance than contributing to a banker sanctioned long-term I hope I get rich slow scheme. Gold and silver held in a personal safe do not return a negative yield.
The same financial advisor (who by the way, cannot sell you physical gold and silver) and would decry the ownership of gold bars or gold coins or rare American gold coins and bags of junk silver because they have a cost to hold (which is slight but perhaps more on that later) and are not guaranteed appreciation and may return a negative yield, will perhaps at the same meeting in the same table suggest that you purchase life insurance, or an annuity, or some other type of insurance product.
How Come Insurance Products Are Not Sold As “Negative Yield” Instruments?
Never once we you hear the words “negative yield” or “negative interest rate” applied to a dear insurance product or annuity. Much less will they ever equate commissions and annual fees with a “cost to hold”.
But, if owning physical gold coins and physical gold bars and physical junk silver is serving the function of wealth protection and protection from any nasty fluctuations in the American dollar, or international currencies for that matter, and the physical metals are functioning as insurance, wouldn’t it be only be fair to use the terms and standards of the insurance world to describe gold, rather than try to describe gold’s function and performance as a currency in the terms and parameters of banker created fiat investments? How can yo properly apply the term negative yield rate to a gold currency?
I also understand that what Webb’s intention was, was to point out that so many of the bonds and investments in banking deposit products that for decades upon decades had been touted as better investments than gold because they guaranteed a percentage return, no longer guaranteed a percentage return.
I found Webb’s research to be interesting and on point, and she did a very smart job of explaining bond interest rate and yield, and how someone with a huge amount of power in the banking world and nearly unlimited deep pockets like Mario Draghi would purchase perhaps billions of dollars of these negative yield instruments and how he could make a profit doing so.
In fact, true bit of comic relief Webb brings up the “greater fool” theory and applies it to the negative yield financial instruments that are growing radically in popularity and total market share. The greater fool theory is and has been commonly applied to gold coins and gold bars, and rare gold coins in particular, saying that since your bank won’t turn gold coins into cash and that since you can’t buy groceries with gold bars, you have to find a “greater fool” then you are to sell them to before you can get your cash back out of your gold.
Webb brings up the fact that investing money knowing that you are going to get back less than you originally invested seems foolish, however, this seems to be the new investing norm. Are negative yield rates here to stay?
When you pair your resources with the keen and studied minds at ITM Trading, you can have questions answered, financial history explained, and long-term trends revealed that will change the way you view owning gold and silver coins and bars, and saving and investing.
The Dollar Is A Negative Yield Currency.
For instance, regarding long-term trends, the dollar has lost well over 90% of its purchasing power since it began to lose gold backing in 1933. This is a long-term trend, and one that continues to this day with no change in sight. Trying to save long-term in a currency that is in a long-term downtrend is a flawed concept.
Just as walking into a fine restaurant for dinner knowing you have no money in your pockets to pay the bill, is a flawed concept. The similarities in this example however, is it the penniless restaurant patron knows he will have a nice dinner at the expense of the restaurant owner, while the creators of currencies designed to decline in value and bonds stated to have a negative interest rate know that they will have a very nice dinner at the expense of their respective bondholders and investors.
If you have questions that you want answered about negative yield rates, and you want to add some brainpower to your financial portfolio, or if you are just interested and want to know how to buy gold and silver bars and coins online, visit ITMTrading.com and request a free gold information kit. You can also reach us by telephone at 1.888.OWN.GOLD.