【summary】
There is more than one reason why gold prices are rising.
This is driven by a combination of factors such as inflation, falling real interest rates, a weak yen, geopolitical risks, central bank buying, and investor risk aversion.
| Factors | Impact on gold price |
|---|---|
| Inflation | Easily bought as a countermeasure against decline in currency value |
| Lower interest rates | The relative attractiveness of gold, which does not generate interest, tends to increase |
| Weak yen | Yen-denominated gold prices likely to rise |
| Geopolitical risk | Easily bought as a safe asset |
| Central bank buying | Becomes a demand factor |
However, gold does not yield interest or dividends.
If you hold too large a stock in the hope that the price will rise, there are risks different from stocks.
Gold is an asset that does not yield interest.
Gold does not pay dividends like stocks or interest like bonds.
Value is primarily determined by supply and demand, currency values, interest rates, and investor sentiment.
| Assets | Source of income |
|---|---|
| Stocks | Earnings Growth, Dividends |
| Bonds | Interest |
| Real estate | Rent |
| Gold | Price fluctuation |
When investing in gold, investors often expect it to play a role in asset protection and diversification rather than earning regular income.
Relationship with inflation
When the value of cash decreases due to inflation, it may become easier to buy gold.
This is because gold is a real asset whose value is easily recognized throughout the world.
| During inflation | Things that tend to happen |
|---|---|
| Price rise | Purchasing power of cash decreases |
| Currency instability | Demand for gold likely to increase |
| Asset defense | Bought for diversification |
However, inflation does not necessarily mean that gold will rise.
Interest rates, the dollar, and investor sentiment also move at the same time.
Relationship with interest rates
Gold does not yield interest, so high interest rates tend to put you at a relative disadvantage.
Conversely, when real interest rates are low, it may be easier to buy gold.
| Interest rate environment | Views on gold |
|---|---|
| Rising interest rates | Interest-bearing assets tend to be advantageous |
| Lower interest rates | Gold's relative attractiveness tends to increase |
| Falling real interest rates | likely to be a tailwind for gold |
When looking at gold prices, we consider not only the nominal interest rate, but also the real interest rate, which is calculated by subtracting the inflation rate.
Relationship with the weak yen
The gold price seen by Japanese investors is denominated in yen.
Even if the international gold price remains flat, if the yen depreciates, the yen-denominated gold price tends to rise.
| Situation | Yen-denominated gold price |
|---|---|
| Gold price rise + yen depreciation | likely to rise significantly |
| Gold price flat + yen depreciation | May rise |
| Falling gold price + strong yen | Tends to fall |
When investing in gold in yen, look at both the price of gold itself and the exchange rate.
Points to note when investing in gold
| Points to note | Contents |
|---|---|
| No dividends | No income even if held |
| There are price fluctuations | Even safe assets fall |
| Fees | Different for pure gold reserves and gold ETFs |
| Storage | Physical gold storage risk |
| Taxes | Check taxation of sales profits |
Gold can be used as a protective asset, but it is not a panacea.
Consider combining stocks, cash, bonds, etc.
summary
Reasons for the rise in gold prices include inflation, falling interest rates, a weaker yen, geopolitical risks, and central bank buying.
However, since gold does not generate interest or dividends, holding too much can be a weakness in terms of asset growth.
It is realistic to think of gold investment not only as a way to increase the price, but also as a way to diversify your overall assets.