WisdomTree: The negative yield revolution favour’s gold

October 9, 2019

By Aneeka Gupta, Associate Director at WisdomTree

“Nearly a quarter of debt, worth US$15tn, issued by governments and companies around the world today are currently trading with negative yields. We believe this is a consequence of more than a decade of global central bank easing since the great financial crisis in 2008 in an effort to revive the global economy. In reality, global central bank easing has supressed inflation and interest rates.

“Interestingly, since the start of 2016, gold prices (in US$ per ounce) and the market value of global aggregate negative yielding debt have shown a strong positive correlation of 81%. The ongoing trade related deterioration of global macro-economic data is likely to encourage central banks around the world to continue to ease interest rates which is likely to further supress bond yields. Non-yielding assets such as gold in the current negative interest rate environment appear attractive as it lowers the opportunity cost of owing gold. Not only is gold benefiting from the negative interest rate environment but also from rising geopolitical risks such as Saudi-Iran political tensions and ongoing Brexit uncertainty supporting its safe haven status.”

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