Gold should gain support from negative-yielding debt reaching a new high
If you hold physical bullion you don’t get paid a ‘carry’ yet it costs you money to buy that gold. This simple equation explains why negative rates have always been good for the price of gold, since you’re ‘getting paid to borrow’ that money. Interestingly, as you can see in this graph, recently this relationship has broken down. The white line represents the total US$ value of global debt that is trading with a negative (nominal) yield against the price of gold, in red on the left. Has bitcoin disrupted this relationship? or has the hope that vaccines will reinvigorate the global economy reduced uncertainty enough so as to overpower the historical relationship between negative rates and gold?
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