Abenomics Brings Currency Wars to G7 Talks

Abenomics Brings Currency Wars to G7 Talks

Today’s AM fix was USD 1,449.25, EUR 1,114.12 and GBP 941.62 per ounce.
Yesterday’s AM fix was USD 1,469.50, EUR 1,118.68 and GBP 944.59 per ounce.

Gold fell $16.40 or 1.11% yesterday to $1,456.20/oz and silver finished down 0.92%.

As the global economic slump continues central bankers, such as Mario Draghi, and politicians have vowed “to do whatever it takes” to get economies back on track. Such policies while having near term benefits are considered extremely risky in the longer run by many commentators as they could beckon runaway inflation or stagflation, with ruinous results.

Shinzo Abe unleashed his plan with the blessing of the Bank of Japan to begin aggressive government bond purchases. This has led to a massive growth of 60% on the Nikkei and is deflating the yen and boosting their exports.
GoldCore Market Performance Table

Kyle Bass of Hayman Capital, a strong gold bullion supporter, previously described the country's combination of; the highest Debt-to-GDP ratio, its large trade deficit, low FDI and a declining population as a "vicious cocktail".

Abenomics in simple terms allows the nation’s Prime Minister to push its supportive Central Bank to increase the money supply by ramping up government printing presses, resulting in the yen dollar to break the ¥100 barrier.

Not un-expectantly this, aggressive and potentially calamitous, policy has caused other countries like South Korea & New Zealand to cut interest rates, noting the damaging effects the deflated yen has on its exporters.
Gold in Japanese Yen, 5 Years – (Bloomberg)
Gold in Japanese Yen, 5 Years – (Bloomberg)

Bloomberg surveyed analysts asking if they expect prices to rise next week, 10 were bearish and 5 were neutral. With the recent drop in gold backed ETF’s traders are nervous as to whether the physical demand from bullion coins and jewellery will sustain the rally in prices.

Sentiment in the yellow metal has waned as hope increases that the U.S. economy is recovering and inflation remains in check.

As global economies, such as Japan, start to experiment with unilaterally focused policies, it will become an enormous challenge to contain the underling risks building in the “system”.

Gold, sometimes referred to as a barbaric relic, is considered a safe haven asset. Gold is largely immune from the actions of Central Bankers. A modest allocation of gold is essential in a globally diversified economy. The old Wall Street adage ……put 10% of your money in gold, and hopes it does not work… has never been more apt.

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News From Around The World
Gold Traders Divided Amid Worst ETP Rout Since ’04: Commodities Bloomberg
Gold and Silver Bearish Sentiment Is At Extreme Levels Gold & Silver Blog
Japan is 'adding a Ponzi scheme to a Ponzi scheme' The Telegraph

Insight: Cyprus, Energy & Gold: Wealth Protection In A Lawless World
April's edition of Insight takes a close look at the recent banking crisis in Cyprus and how it is causing other states to consider the imposition of taxes on depositors' savings. The reasoning behind these 'taxes' is to part cover the colossal levels of indebtedness that most nations find themselves in.
Chris Sanders, our Insight April contributor, maintains that it is only capital accumulation enabled by real economic growth that can alleviate the massive levels of indebtedness. Unfortunately, Sanders finds that this is nigh on impossible given the excessive energy costs required, or as he puts it, 'the marginal energy to power such growth is not there to do so.'

On April 15th, a small number of traders executed a suspicious sale of futures on the COMEX in New York which resulted in an 18% fall in the price of gold. Sanders points out that on the one hand we have this level of indebtedness that isn't going to go away, and on the other, we have a financial system that appears to operate outside the general rule of law. When you take everything into account, Sanders surmises that it's all a great advertisement for holding gold or silver in secure storage on an allocated basis.

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