Gold’s Positives - Today's Negative Rates and Tomorrow's Rising Rates- Negative Interest Rates and Rising Interest Rates Positive For Gold- HSBC suggests negative rates may drive customers out of digital and into holding paper cash- ZIRP and NIRP very positive for gold- Rising U.S. rates not negative for gold due to emergence of China, India, Middle East and EMs- When rates do rise will be positive for gold- Costly in terms of wealth preservation and returns not to have an allocation to gold- Gold “going higher” and “a big buy here”- Gold up 3.1% in euros and 2.2% in pounds this weekOne of the persistent arguments against owning gold by many financial advisers and brokers is that it "does nothing" and it incurs storage costs. Unlike cash, which earns interest, gold is a non yielding asset. The second is that gold will perform badly when interest rates rise. Both arguments are demonstrably misguided.In today's world of ZIRP and NIRP - zero percent interest rate policies and negative interest rate policies - and actual negative interest rates in a growing number of countries internationally - the old rationale that favours holding cash over gold is increasingly defunct. Base rates in the industrialised nations have been near zero since the financial crisis of 2008. Frequently throughout this period the rate of inflation has been higher than this implying a loss in spending power over time for each unit or currency.This factor, coupled with the many risks which were left unresolved or have been exacerbated in the wake of the last financial crisis - which we consistently cover here - provides a strong incentive to hold gold in favour of cash. These risks include - massive unpayable debt leading to currency debasement and a likely international monetary crisis- increasing geopolitical tensions between NATO nations and Russia and in the Middle East- risks of cyber terrorism and cyber warfare to the massive, unwieldy digital banking and financial system- risk of confiscation of bank deposits in event of bank failures - the developing bail-in regime In the past few months the central banks of Sweden, Denmark and Switzerland have entered into the uncharted waters of negative interest rates. Interest rates look set to go lower in the short term, prior to going higher in the long term. An interesting research note from HSBC this week suggests that QE would have little impact on these smaller, open economies to spur inflation and - in the case of Switzerland and Denmark - direct intervention into FX markets have led to further difficulties. It was in this context that Sweden's Riksbank pushed the repo rate into negative territory. HSBC suggest that the Riksbank experiment will "act as a barometer for central banks around the world trying to tackle low inflation or deflation." If and when QE in the major currency blocks fails to achieve its stated objectives it is not unlikely that central banks who - as HSBC points out - must be seen to be doing something, will follow suit even if no demonstrable effects are seen in Sweden et al. How domestic banks react to negative rates remains to be seen. To date, they have taken no action because the Riksbank has given no indication of how long the policy will be in place. HSBC points out that if the banks continue to have to absorb the costs, it will impair their ability to lend causing further deflationary pressure. On the other hand, if they pass the costs onto their customers they may decide to pull their cash out of the banks causing a liquidity crisis and bank runs. Central banks around the world continue to hold and accumulate more gold. Central banks are the largest buyers of gold today which is not surprising given the debt levels in the U.S., UK, Japan and indeed much of the EU today. This shows that monetary authorities, the entities who actually print and digitally create paper and electronic cash today still regard gold as having a very important function.It is also important to note that contrary to received wisdom by many market participants today, gold should perform well in a rising interest rate environment.Gold should increase even if U.S. interest rates rise as rising interest rates will be bearish for the risk assets - equities and bonds. Gold has a proven long term negative correlation with equities and bonds.This was clearly seen in the 1970s (see chart) when interest rates and gold rose very sharply during the decade and stocks and bonds has a torrid time. Gold becomes vulnerable towards the end of an interest rate tightening cycle as was seen in 1980 when real interest rates are meaningfully positive - nominal interest rates are 2 or 3 per cent above the rate of inflation.Nominal interest rates more than doubled in the course of the 1970s to over 20%. At the same time, gold prices rose 24 times - from $35 to over $850 per ounce (see chart above and below).Indeed the period of most aggressive interest rate increases were from 1977 to 1980 when interest rates rose from 4% to over 20% and this corresponded with the period of gold’s greatest gains - from below $200 to over $800 per ounce. Also of importance is the fact that due to the emergence of China as the world’s leading gold buyer and other emerging markets (India, the Middle East, Turkey etc) now accounting for more than 70% of gold demand yearly, higher U.S. interest rates will have less influence on gold prices than is commonly expected.Besides the example of the 1970s, another example of gold performing well in terms of rising interest rates is in the period between October 2003 and October 2006, when gold posted a cumulative return of almost 60 per cent when U.S. real interest rates jumped from -1 percent to 3 percent, the report showed. During periods of rising U.S. interest rates, gold's relative low volatility also makes it a valuable asset in a properly diversified investment portfolio. Both stocks and bonds are likely to deliver lower than average returns in the coming years and there is indeed a real risk of material corrections and even crashes in stock and bond markets. In this increasingly mad monetary world, a world which looks likely to be seen in most western countries, gold will serve its function as a secure store of value and also as a hedge against a currency crisis. ZIRP and NIRP are positives for gold as will be rising interest rates when eventually they come.Not owning gold in the unprecedented interest rate environment of today is imprudent in the extreme. It will be costly both in terms of returns but also in terms of wealth preservation.It is not regarded as such now but it would appear to be only a matter of time before the penny drops about the inherent risks of not having an allocation to gold today. IMPORTANT COMMENTARY THIS WEEK "Gold Going Higher" - CNBC "Gold A Big Buy Here" - CNBC Gold-To-House Price Ratio Now In Repeat Of Mid-70s Rally Before A Huge Plunge Down? - Daily Coin Europe's Manhandling Of Greece Is A Strategic Gift To Russia's Vladimir Putin – The Telegraph Without Serious Change, Britain Is On Course For A Greek-Style Debt Bomb - MoneyWeek Breaking Gold News and Commentary