“Amazingly, people are paying Switzerland to warehouse their money for 10 years…That makes gold a high-yielder, because it yields zero” – Jeff Gundlach

Jeff Gundlach is correct. At 0%, Gold is now yielding more than two year government bonds in many countries in Europe and has an equivalent yield to that of Japan.

Welcome to the new market paradigm, the era of negative yields and paying to lend money, where everything you thought was true of markets has been flipped on its head.

Gold may have been down last year in dollar terms, but for Japanese and European investors faced with a rapidly depreciating currency it was one of the best investments.

With a rally to start the year, Gold is now up over 6% since the start of 2014 in dollar terms but up 19% in Yen terms and 30% in Euro terms.

Most investors only think of Gold as an inflation hedge, but Gold has historically also done well during deflationary periods with negative real interest rates. Today we are in an environment of not only negative real interest rates but negative nominal interest rates as well. Germany, for example, has negative interest rates on their government bonds through six years.

If central banks continue to fight one another over who has the weakest currency, pushing yields further into negative territory, gold may become an increasingly attractive option.

The knock on Gold has often been that it “doesn’t yield anything” and that it can be highly volatile. These are valid critiques but today you can say the same thing about the Euro, the Yen, and the Swiss Franc. As long as this is true, the question for investors is which asset is a better safeguard of their wealth: Gold or negative yielding bonds in a rapidly depreciating currency.