For Spanish savers, the financial pages are all crisis, no solution...

Spain's financial crisis might be hardening the politics of capitalists vs. workers and the unemployed, but it's hardly benign for the first group.

The IBEX 35 stock market index has fallen very nearly to the 6-year low hit in March 2009, and closed Friday at levels first seen in 1997. Worse still, according to the Bank of Spain's latest Financial Stability Report...

• The value of mutual funds has halved since 2007;
• Private companies are choosing to hold bank deposits in other countries;
• The new Royal Decree Law - capping mortgage-interest rates for borrowers - has "in effect limited the interest rates offered by banks on their deposits";
• Seeking higher rates of return, households are increasingly accepting Spanish bank products which are not covered by the deposit guarantee fund (FGD).

Given this financial crisis, you might expect Spanish savers and investors to be choosing Gold Investment instead. "Years of low return on risk capital go with years of high returns on gold," as John Dizard of the Financial Times put it way back in 2007. And years of low returns is precisely what Spain's finance industry has been delivering since long before then.

Larger Image - * Non-institutional, Spain-domiciled. Data from BullionVault and Morningstar.es

Yet the Spanish media's financial press, stuffed full of crisis headlines like everything else (including the sports pages after last week's dismal Champions League results), isn't pointing to possible escape routes. Indeed, the only news on gold - the classic escape from low interest rates and bank-credit risk - is that "the rush peaked last year" and interest is now waning.

"Gold has traditionally been a safe haven," says Expansion, "having a very low correlation or even negative correlation with risky assets, allowing investors to reduce the total risk of their portfolio. This feature attracted many investors [worldwide], anticipating declines in risky assets. But gradually the good performance of gold attracted more investors, who began to speculate in the metal."

Forecasting a "very common" event for gold today, Expansion sees later investors caught out as the market turns - a view which may well prove to be true. Who can say for sure right now? Any Spanish citizen buying gold in mid-2007, even as the financial crisis became plain to see, would now have 135% more in Euro terms, and after paying tax on their gains, too.

The crisis which drove them to buy has only got worse. The current lull in prices, and the current lull in global demand, doesn't square with the miserable facts or outlook for returns on risk capital either in Madrid or elsewhere.