Gold Demand Jumps in Japan as Sub-Zero Rates Spur Call for Haven

Gold sales surged in Japan through March after the country’s move to set negative interest rates sent investors scurrying for a shelter, a further sign that global central bank policy of keeping borrowing costs low or below zero is stoking demand for bullion.

Bar sales climbed by 35 percent to 8,192 kilograms in the three months ended March 31 from a year earlier, Tanaka Kikinzoku Kogyo K.K., the country’s biggest bullion retailer, said in a statement Thursday.

Monetary authorities responsible for about two dozen countries have dropped policy rates below zero to try to revive economies. In a bid to stimulate lending, the Bank of Japan in January joined the European Central Bank in setting sub-zero rates, along with Denmark, Sweden and Switzerland. Low or negative rates raise the appeal of bullion as it’s not an interest-bearing asset.

The Europeans are also buying gold as a haven because of negative rates, Andrea Lang, director of marketing and sales at the Austrian Mint, said in an interview in Singapore at the start of this month.

“History shows that, in periods of low rates, gold returns are typically more than double their long-term average,” the World Gold Council said in a March 31 report. “Over the long run, negative interest rate policies may result in structurally higher demand for gold from central banks and investors alike.”

Gold advanced 16 percent in the three months through March to post its best quarter in three decades, as the Federal Reserve deferred plans for further interest-rate increases. Bullion traded at $1,234 an ounce on Thursday by 1:59 p.m. Singapore time.

Consumer demand in Japan almost doubled to 32.8 metric tons in 2015 from 17.9 tons a year earlier, according to Gold Council estimates.

Bloomberg
Masumi Suga
April 18, 2016