Snip, Snip: Haircuts Are Trendy Among Central Banks

Minutes released this week from the Federal Open Markets Committee meeting Sept. 17-18 show that there are sharp divisions among members when it comes to future policy. The committee approved a quarter-point rate cut but expressed concern that markets are expecting more rate cuts than the central bank intends to deliver, CNBC reported. 

On a broad level, the most recent rate reduction comes amidst a global trend of cutting interest rates — sometimes even to the point of going to negative rates. At the same time, central banks are buying up gold and increasing their stores at a much higher rate than has been seen in decades. 

“With heightened economic concerns in the Eurozone and the need for greater fiscal interventions on top of the ECB monetary interventions, national central banks are motivated to add to gold reserves,” explained David McAlvany, CEO of gold-buying fintech Vaulted. “In an era of low to negative interest rates, financial assets throughout Europe no longer present opportunity cost relative to gold. Gold relatively speaking is a high-yield asset when set against Bunds and many other sovereign obligations.”

This is a trend we’ll certainly be keeping a close eye on.