Japanese Pension Funds With $3.4 Trillion In Assets Seek Safety In Gold

December 18, 2012

The world’s largest, most sophisticated investors are turning to gold…

These fundamentals are leading to broad based global demand for gold – from retail investors to institutions and pension funds. Japanese pension funds are increasingly looking at gold according to an article in the Wall Street Journal this morning.

Diversification into gold is taking place in order to protect against sovereign risk, debasement of currency risk and inflation risk.

In March 2012, Okayama Metal & Machinery became the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies. Okayama manages pension funds for about 260 small and mid-sized companies in the Okayama area.

“By diversifying currencies, we aim to reduce risks associated with them,” said Yoshi Kiguchi, the fund’s chief investment officer. “Yields become stable if you put small amounts into as many types of holdings as possible.”

Of its 40 billion yen ($477 million) in assets, the fund has invested around ¥500 million-¥600 million in gold, he said.

Initially, the fund aims to keep about 1.5% of its total assets of Y40bn ($500m) in bullion-backed exchange traded funds, according to chief investment officer Yoshisuke Kiguchi, who said he was diversifying into gold to “escape sovereign risk”.

Other pension funds in Japan are following their lead according to the Wall Street Journal.

Japanese pension funds are diversifying into gold “largely to mitigate the damage from possible market shocks”.

Japanese pension funds invest mainly in domestic stocks and bonds. Until recently, none have looked to gold or other physical assets.

Gold, whose price movement isn’t historically correlated with those of stocks or bonds, can protect portfolios from being damaged too badly in times of market stress, investment managers say. Low interest rates also justify holding non-yielding gold in place of cash.

Mitsubishi UFJ Trust and Banking Corporation said it has secured more than Y2 billion in investments from two pension funds for a gold fund it started in March.

Gold is also used as a hedge against inflation, which is becoming a bigger concern as global central banks buy ever-more bonds, market watchers say.

Even a small allocation by pension funds internationally to gold would result in a significant new source of demand which could be a new fundamental factor which propels prices higher in the coming years.

Dollar Falls Before Fed Considers More Pumping…Gold Rebounds

December 10, 2012

The US dollar is starting to fall against world currencies as investors anticipate more stimulus by the Federal Reserve.

The dollar weakened against most of its major counterparts today amid bets the U.S. central bank will add to monetary stimulus. The U.S. currency fell versus the euro and the yen before the Federal Reserve starts a policy meeting tomorrow amid forecasts it will expand bond-buying plans.

“People are looking ahead to the Federal Reserve this week, which should be an event that is positive for risk and negative for the dollar,”  Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, told Bloomberg News this afternoon.

The U.S. currency declined versus 10 of its 16 most-traded counterparts.

The U.S. Federal Open Market Committee meets for the last time this year on Dec. 11-12. It will consider whether to expand purchases of assets after its so-called Operation Twist program of swapping $45 billion a month in short-term Treasuries for long-term debt expires this month.

“There’s a good chance that the Fed will announce a new round of money printing and bond buying,” which would be negative for the dollar, said Imre Speizer, a strategist in New Zealand atWestpac Banking Corp. (WBC).

Not surprisingly, the weakness in the dollar pushed gold higher. Spot gold was last quoted up $8.00 per ounce to $1,713.00.

Gold tends to move higher on a weaker dollar for two reasons:

1. Gold is priced in dollars, so a weaker dollar naturally pushes up the price of gold in dollars.

2. Gold is considered a main rival to the dollar as the world’s reserve currency, therefore, when confidence in the dollar wanes, demand for gold tends to rise.


Gold American Eagle Sales Are Soaring Due to Fiscal Cliff Threat

December 10, 2012

Demand for gold coins among American investors has soared since the presidential election, as investors are growing increasingly worried about the lack of action to address America’s debt problems.

The US Mint’s sales of American Eagles, the most popular bullion coin, soared 131 per cent in November, hitting the highest level in over two years. November was also the strongest month in 2012 for gold Maple Leaf coin sales for the Royal Canadian Mint.

The political gridlock in Washington and the prospect of further quantitative easing when the Federal Reserve’s “Operation Twist” expires at the end of 2012 have fuelled demand for gold investments among investors.

While the jump in gold bullion coin sales highlights gold’s role as the preferred safe haven for investors, investors should realize that bullion coins make up a relatively minor sector of the investment market for gold coins.

Rare gold coins, for example, offer security, privacy and performance advantages over gold bullion coins. They are immune from possible government restrictions on private gold ownership. They are anonymous and, because of their scarcity, they can appreciate even when the price of gold is falling.

The experts at Coin Trader can help you select the gold investments that are right for you.

2% “fabrication premium”  we have today for bullion coins like American Eagles is similar to jewelry premiums in Asia.

A Chinese Economic Crisis: A Threat to World Financial Markets

September 27, 2012

As the US looks inward in advance of the upcoming presidential election, another factor largely beyond our control is looming on the horizon–or perhaps OVER the horizon.

While economists and political pundits in America debate the health and outlook of the US economy, the Chinese economy is quietly falling into crisis. Because the Chinese economy has been an engine of growth for the global economy, a severe slowdown in China poses a serious threat to world financial markets. Many companies whose stocks trade publicly on exchanges from Shanghai to Sydney to Tokyo to New York to London have major interests in China. A recession in China will severely impact those companies and thus world stock markets.

During such a scenario, at the outset, gold may be temporarily hurt by interrupted Chinese demand, but over the long-term, gold investments tend to move independently of stocks, making them an ideal way to hedge your portfolio from any scenario that threatens world stock markets.


Central Banks Moving Into Gold

August 7, 2012

Punctuated by a sharp increase in gold holdings by South Korea’s central bank, world central banks are moving into gold, expanding their gold holdings in a major way.

What do these ultimate insiders know that the average investor doesn’t know? Central bankers have access to information and statistics that we are kept in the dark about. This makes their move into gold an important signal for the rest of us.

Do not dismiss South Korea as a minor player in the world economy and financial markets, they’re not. South Korea is an Asian economic juggernaut, with one of the fastest growing economies over the past quarter century.

More from Reuters:

South Korea buys gold; central bank purchases set to rise

South Korea boosted its gold holdings by nearly a third in July, buying 16 tonnes as
part of the central bank's efforts to diversify its massive foreign exchange reserves.

South Korea is Asia's fourth largest economy and its central bank said on Thursday that it now holds 70.4 tonnes of gold,
after paying $810 million last month for the purchase.
The increase barely lifted gold prices but supported expectations that central banks will remain gold's key buyer as
increased volatility in global markets and waning confidence in the U.S. dollar fuel a global drive to vary foreign reserves
away from the U.S. currency and government debt securities.
The latest purchase was the third by the Korean central bank since June last year, when it started increasing its reserves
after leaving them unchanged for more than a decade. 

In the last 13 months, South Korea's gold reserves have grown five-fold but remain only a fraction of China's over 1,000
tonnes and Japan 765 tonnes, according to the World Gold Council (WGC).

Central banks bought 80.8 tonnes of gold in the first quarter, adding to 2011 purchase of more than 450 tonnes, the
WGC said. In recent months, a number of countries including Russia and Kazakhstan also increased their gold reserves, data
from the International Monetary Fund showed. 
"We have been of the view that we would increasingly see more diversification of reserves and investments into gold,"
said Chirag Mehta, gold fund manager at Quantum Mutual Fund in Mumbai, India. "This trend is likely to continue".

Gold Soars as Stocks Come Down

June 26, 2012

Worries about came back to haunt stock markets on Monday as the price of gold soared due to safe haven buying.

Fresh concerns that the economic and financial situation in Europe is deteriorating slammed world stock markets on Monday. Stock markets in China, Japan, Germany and London were all down sharply. The Euro Stoxx 50, an index of European blue chips, fell by 2.6% during the day’s session.

The carnage washed up on American shores as well. The Dow Jones Industrial Average fell 138 points, or 1.1%, the Standard & Poor’s 500 finished 21 points lower, or 1.6% and the NASDAQ was down 56 points, or a full 2%, at the close.

Gold was decidedly higher amidst all the chaos, rising more than $15 per ounce to $1,588.00.

This was classic safe haven buying of gold. Despite the fact that the dollar was higher against the euro, one of its chief rivals, and despite the fact that one of the key indicators of inflation, the price of oil, has been declining precipitously, gold still rallied.

When investors have seemingly no place to turn, gold always stands out as the clear choice.

This vividly demonstrates the true independence of the gold market, and why gold has been considered a safe haven for 5,000 years. Against the continued backdrop of uncertainty and crisis in Europe, gold is once again providing vital security, rising while stocks are falling.

To learn more about the benefits of owning gold, contact Coin Trader today at (866) 603-1938.


May 30, 2012

Gold has been on a “tear” for a decade. The price of gold has literally risen in each of the past 10 years. This has resulted in gold outperforming most other investment categories during this period of time.

Despite this excellent long-term momentum many investors have taken to sitting on the sidelines, rather than buy gold investments because they fear that gold may “have had its day.” Some observers even claim that gold is a “bubble,” getting ready to burst.

The available evidence suggests that gold is still vital to a properly diversified investment portfolio because (i) the macroeconomic and geopolitical environment is still conducive to higher gold prices going forward and (ii) in real terms, the price of gold isn’t all that high.

The Macroeconomic and Geopolitical Environment

 Before assuming that gold has finished its run, investors should ask themselves, “What has changed in the macroeconomic and geopolitical environment to keep the price of gold down over the long-term going forward?”

The answer of course is the macroeconomic/geopolitical environment is actually supportive of higher gold prices over the long-term. For evidence, one need go no further than America’s national debt and ongoing federal budget deficits.

The national debt continues to grow, it is now well over $15 trillion. Meanwhile, the federal government keeps spending and is running an annual deficit of some $1 trillion, an amount that essentially gets added to the national debt each year.

This situation ensures that the US dollar will continue its long-term decline and likely means that the US will have no choice but to turn to a hyperinflationary monetary policy at some point down the road. Why? Because that debt must be repaid and the only way the US Treasury will be able to live up to its obligations is by paying back creditors, such as China, with dollars cheapened by inflation.

In other words, it is inevitable that the Federal Reserve will fire up the printing presses like never before to pay off the debt.

This is the reality that overrides all other factors in the economy and the political realm and it is one for which investors must be prepared. Gold investments are uniquely qualified to protect wealth from the ravages of the high inflation that will eventually come.

But is the price of gold really that high?

As we sit down to write this article, the price of gold is trading at $1,550 per ounce. This is NOT lofty by any measure.

Consider that the all-time high for gold was over $1,920 per ounce. That means that just to get to its previous high, gold would have to rise by nearly $400 per ounce. That is hardly an overvalued investment. Also, consider that in real terms, compared to other financial assets, such as the stock market, the price of gold is still very low.

In 1980, the price of gold reached around $800 per ounce. In the same year, the Dow Jones Industrial Average peaked at around 1,000.

Consider today that gold is less than twice the level that it was in 1980, yet the Dow is trading at over 12,000, a dozen times the level of 1980. Despite this, gold has actually outperformed stocks over the past 10 years, yet gold still seems undervalued compared to the stock market.