Real interest rates in Germany and many other economies are negative. And for many years. This supports the gold price, even if real negative interest rates were already lower.#
The gold and the interest
If conservative forms of investment, minus inflation, have a negative interest rate, then one of the disadvantages of gold that is repeatedly brought forward by financial people is eliminated. They even give the precious metal an advantage. Physical gold, i.e. gold bars and gold coins do not generate any interest. Gold owners also cost no interest. As a defensive form of investment, gold can score even more.
Real interest rate development
We regularly calculate real interest rates from the perspective of institutional investors. We compare the official inflation rate with the interbank interest rate EONIA (Euro Overnight Index Average). The following graphic shows the development of real interest rates since 2008. Most recently, German inflation was 0.6 percent. The EONIA interest rate stood at -0.45 percent. This results in a real interest rate of -1.05 percent. Since the beginning of 2015, this has been in negative territory. It recently rose somewhat due to falling inflation. In August 2018, the previous record low was reached at -2.86 percent.