I wrote recently about how governments around the world are waging war on cash.
This war has too fronts.
The first involves phasing out high denomination banknotes, like the $100 bill and the 500 euro note.
The second involves banning cash transactions over a certain level.
But now there is a third front opening up. And that is the imposition of negative interest rates on bank deposits.
Not only is the cash in your pocket under threat, but so is the money you have in the bank in your savings account.
Interest rates have been falling steadily, to close to zero. Now some countries in Europe and also Japan are experimenting with negative interest rates. This means that instead of earning interest on your savings, you will actually be charged for the privilege of keeping your money in the bank.
Little wonder then that in Japan there has been a huge surge in the market for safes. People are installing safes in their homes and keeping their money there, in the form of cash, rather than keeping it in the bank.
We are at a strange crossroads here.
For decades investors have downplayed the value of gold simply because it offers no dividend or return for its owner. The argument has been that the smart money would either be invested, or earn a modest interest in the bank.
That argument has a certain merit, right up to the point when interest rates hit zero. And it falls apart completely when central banks impose negative interest rates.
Why keep money in the bank and see it depreciate in value every year when you can convert that cash into gold? Gold bullion may not pay a dividend, but you won’t see 1% of its value falling into the hands of your friendly local banker each year.
As for the Japanese purchasers of safes, they may find they’ll soon have to upgrade and buy bigger safes. If the Japanese central banks follow the lead of other countries around the world and start phasing out high-denomination banknotes, it will take a big safe to hold a family’s savings, all piled up in low-denomination notes.
Alternatively, they could buy gold. You can fit a small fortune into a pretty small safe if you trust in gold instead of in cash.
Cash is under threat, around the world. And one of the key beneficiaries will be gold.
Which is why now might be a good idea to start converting some of your cash savings into gold bullion.