Investing Smartly in Gold with NISA, Seizing Opportunities in its Unwavering Price Surge

The Global “Money Glut” Behind Rising Gold Prices

Why, then, has gold become correlated with stocks and the U.S. dollar, repeatedly reaching new highs under less than contingent conditions?　Of course, many factors are involved, but there is one thing that seems to be of critical importance: the increase in the monetary base. That is the increase in the monetary base. The monetary base is the amount of money supplied by the central bank.

Let’s take a look at the monetary base of the Fed, the most influential central bank in the United States. The monetary base, which had been increasing in line with the economic growth rate, suddenly began to expand rapidly in September 2008. The trigger was the Lehman Shock. In order to cope with the credit uncertainty and economic crisis caused by the Lehman Shock, a large amount of money was supplied to the financial markets.

Since then, dollars have been issued every time a similar situation occurs, and in March 2020, an unprecedented amount of money was supplied as a policy response to the new coronavirus pandemic. As a result, the Fed’s monetary base swelled to about $6.4 trillion in December 2021.

This is not limited to the Fed. Japan, the EU, China, and other central banks have also been aggressively increasing their monetary bases as part of their economic and monetary policies. As of March 31, 2024, Japan’s monetary base stood at 666 trillion yen, a record high. This unprecedented “money glut” is thought to have led to a massive inflow of funds into the gold market as well as the stock market.

The expansion of the monetary base also has an inflationary effect on the real economy, which in itself is a reason to buy gold. Since inflation depreciates the value of money, gold, a real asset, is more likely to be bought. This is why gold is said to be resistant to inflation.

 

China’s Booming Purchase of Gold

One prominent buyer of gold in concrete terms is undoubtedly China. Since the 2010s, central banks, particularly those of emerging countries, have been increasing their gold holdings, with China and Russia actively acquiring gold. In particular, the People’s Bank of China, China’s central bank, reportedly purchased a record-high of 225 tons in 2023, according to a report by the World Gold Council, an international gold industry organization.

The purchases of gold by China and Russia as nations are believed to be aimed at reducing reliance on the US dollar, the world’s reserve currency. As political tensions with the United States escalate, this trend is strengthening year by year.

Moreover, individual gold purchases are thriving in China. China has always been a major consumer of gold, valued not only for jewelry but also for investment purposes such as bullion. Added to this, serious real estate downturns and stock market declines have coincided, fueling the popularity of gold as an asset among individual investors. In 2023, demand for jewelry in China reached 630 tons, while demand for investment-grade bullion and gold coins amounted to 280 tons, totaling 910 tons.

As a result, China’s government and individual gold purchases totaled 1,135 tons, accounting for approximately 31% of the world’s annual production mined from mines worldwide, which was about 3,644 tons last year. China’s buying spree is supporting the gold market (data from the World Gold Council).

 

 

You can also buy gold with NISA.

For those who are considering investing in gold, here are some gold-related financial products that can be purchased with a NISA account.

Aside from individuals with ample surplus assets that can be invested in gold, accumulation investment would be a safe bet considering the high volatility of the gold market. If this is the case, an index fund linked to the gold price would be an option. The following is a list of funds that can be purchased under the “Growth Investment Limit” of the NISA.