Gold is now high yield! (versus Euros)

Gold is now high yield! (versus Euros)

One of the strongest historical arguments against gold has been that it doesn’t offer a yield.

To counter that, gold bugs have pointed to the lack of counterparty risk (depends on how the gold is stored, of course) and to its inflation protection.

But now, at least when it comes to Euros, the yield argument no longer works. Depending on who you bank with, gold can offer a much higher yield – even after storage costs – compared to the EU’s currency!

Remember that the ECB’s deposit facility is at minus 0.5%. The ECB has started lending to banks at minus 1%.

This is the context in which I received the following email from BullionVault (with whom I have no relationship except being a former customer):

BullionVault’s bank might be borrowing from the ECB at minus 1% – and deposits from its customers at 0% might have started to look too expensive!

BullionVault’s gold storage service, which is something I have used myself in the past, costs 0.12% per year (including insurance). Therefore even after insurance costs, gold storage is six times cheaper than some Euro deposit accounts!

I’ll be a gold bug for as long as these strange times continue…

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Wordpress (3)
  • comment-avatar

    Hi Graham, I hear that due to QE is out of hand, we can expect hyperinflation. In that case gold/silver might be the winner. Whats your thought?

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  • comment-avatar

    I’m not Graham but I don’t think you even need HYPERinflation for Gold (and silver) to do well. Very low, non existent or negative interest rates are already doing the job. I’m sure those nice government men would like some more inflation (and looking at my weekly shopping basket they’re already getting some) to inflate away all that debt they’re generating.

    Gold and Silver already up over 28% since Jan 1 in sterling terms and I’m expecting a lot more to come.

    If I was braver I’d probably buy some gold/silver miners but I’ve made that mistake before so happy to sit with physical ETFs in both.

    Of course, if inflation really does go hyper then gold and silver will at least help with the Tesco bills going forward.

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  • comment-avatar

    Worth a read is John Authers take today on Bloomberg on possibilities for a gold short squeeze:-

    https://www.bloomberg.com/opinion/articles/2020-07-27/a-mighty-short-squeeze-may-be-building-in-gold-futures?srnd=opinion

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