Gold is up 6.6% in Japan

The yellow metal has surged as the government drives the yen lower against the dollar to boost the economy.

By Charley Blaine Mar 22, 2013 11:00PM
There's something wacky going on in gold. Gold (-GC) in New York is down 4.2% so far this year, with Friday's close of $1,606.10 an ounce. Gold in Japan, however, is up 6.6%.

This is not a joke. It's real. In fact, over the last year, gold is down 3.7% in New York, with gains in August and September offset by declines in October, December and February.

Here's how gold did in Japan over the same 12 months: UP 10.5%.
So does that mean you should rush out and buy gold denominated in yen?

At the very least, you need to check out the math. The reason: The dollar has risen 8.6% against the yen in 2013. So the effect of currency translation may wipe out much, if not all, of your gains.

Here's the math. Let's say you bought 10 ounces of gold in Tokyo on Dec. 31, at the price of 142,462 yen an ounce. Or a total of 1.462 million yen. On Friday, your gold was worth 151,916 yen an ounce, or 1.5916 million yen. Small Stack of gold ingots © Anthony Bradshaw/Photographer

But, as we said, the yen has fallen from 8.6% against the dollar. So your investment in dollar terms has actually declined 1.85%, from $16,298 to $15,997. Admittedly, that's a better performance than buying the gold in dollars and letting it fall 4.2%.

In addition, the aggravation factor is something to think about. And, of course, we haven't considered commissions and other fees that might be required.

So here's the bottom line. Gold is not just a store of value, as many gold bulls like to say. It also acts like a currency, moving up and down as currencies move. And that's what is going on with the yen.

The Japanese government wants to kick its economy into a higher gear after years of relative stagnation. To achieve that end, the Japanese are deliberately pushing the yen lower. That helps their exports and makes imports more expensive. You hear the same thing whenever the U.S. dollar moves lower.

And because the dollar is getting stronger against the yen and the euro (up 2.4%), complaints are starting to build that the dollar is too strong.

Gold plays another role in investing these days. It's often called a protection against inflation. It also is cited as a protection against deflation.

Let's put a simpler label on it: Gold may be a not-always-perfect protection against uncertainty -- with emphasis on the words, "may be."

What's happened to gold so far in 2013 makes the point. So does what happened in 2008.

That year, gold jumped about 20% between Jan. 1 and its March 18 peak of $1,003.20 an ounce. It fell nearly 30% between March 18 and Nov. 13 when it settled at $704.90. And it moved up 25% to $883.60 an ounce by year-end.

If you had bought gold at the beginning of 2008 and held on, you might have had a 5.8% gain, not bad in a year when the Dow Jones industrials ($INDU) fell 33.8% and the Standard & Poor's 500 Index ($INX) fell 38.5%.

It has doubled since then and briefly topped $1,800 an ounce, with much of the increase coming during the 2011 budget crisis. But gold was up 7% for all of 2012 before coming under pressure this year.

It was up 0.9% this week and is up 1.8% in March. That was a better performance than the stock market. Thanks to a decent rally that saw the Dow rise 91 points on Friday, the major averages ended the week with very tiny declines.

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Tags: GLDgold
11Comments
Mar 23, 2013 1:04AM
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"So here's the bottom line. Gold is not just a store of value, as many gold bulls like to say. It also acts like a currency, moving up and down as currencies move. And that's what is going on with the yen."

 

Gee, maybe that's why gold's a hedge against inflation?  Strong dollar is relative. Just wait for inflation to start to kick in around 2014 and we'll see what happens then.

 

Mar 23, 2013 8:08AM
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Gold cannot be inflated, unlike dollars.  That $20 Gold piece and $20 bill were worth the ame in 1934.  Now the $20 gold piece is worth 85 of those $20 paper bills.  

 

Now maybe the money supply s 8500% greater than in 1934?

 

You CANNOT have deflation while massively printing money.  The only way to have deflation is to DECREASE the amount of money chasing goods.  The stock market and gold adjust for mone printing.  The gains are not real growh, but fake, INFLATION.

 

The market will adjust higher until the fed cuts back on their 85 billion/month in money printing.

Mar 23, 2013 2:19PM
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Miragy.....Been kind of wondering where you have/had been ??

You seem to have been fairly quiet the last week or two...

Hope you haven't been sick....Thought you might have been on vacation?

 

But hell everyday is a Vacation for you...

You just go in to the Company....To make sure the "Cattle Prods" are all "charged up."

And make sure nobody has destroyed or hidden the "bullwhips."

But anyway "Have a Nice Day" or weekend.

Mar 23, 2013 6:21PM
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Gold will never go under $1,200.00 an ounce since it cost about $1,200.00 an ounce to get it out of the ground. If prices approach $1,200.00 miners would stop mining until demand picks up driving the price back up. I am very lucky to buy lots of gold in 2008-2011.
Mar 23, 2013 1:15PM
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Gold hitting $2000...I can't even remember when they started saying that, been a few years at least.

Saying it long enough, sooner or later it might just do it...?

I know that goddamn Volcano is going to blow maybe this year or next; Which year, decade or century is about as predictable as saying when ETs will arrive...Martians or Rigelites.?

Maybe we will get a few days warning maybe not..?

 

The last highs were in the 18s and a short run in the 19s.....Those were a "couple good times."

When faced with Inflation, in maybe the not to distant future, decoupling of the Dollar or some World strife situation, rises in Commodities or a better recovery? I think we will be prepared to take advantage of the situation....The old Boy Scout Motto.

Mar 23, 2013 12:26PM
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 Love it when the Analyst and Pundits..

Start writing articles and jabbering about PMs especially Gold and maybe Silver...

I find that an indicator of moves going North...Some may laugh and jest.

But it always pays to diversify a little of your holdings into PMs.....I prefer Gold.

Coins and Jewelry may be okay...And if you are comfortable with Bullion, or know your way around any of the pitfalls and fees associated with the purchase of Yellow.

 

Gold has cycles, so do other PMs and industrial metals, commodities and such..

Recognizing those time frames, can be rewarding..

Conventional wisdom dictates from 7-10% maybe in holdings, maybe tops of 15.....?

Going into a Recession we held 25-35% of our investments in Miners....They cycle too with prices of commodities....Depending a lot on the business plan, reserves, and their modes of operation.

It helped us from losing our azzes worst then we did...Along with diversifying profits into other "high class" stocks...Without PM investments and a few other Recessionary proof type companies, we would hve taken a much longer time to recover....

For those that don't think "Gold or Gold investments aren't Money;"....Were probably on the outside of the wall or curve, looking and wondering what to do, for a longer period of time...

But it has to be traded, to serve any useful value or recoup gains...

Storing or hoarding are for only Central Banks....And the very well off or Elite. 

Mar 24, 2013 3:08PM
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A Gold Sentiment Survey...Touts Gold being up next week..

 

About 79% upside..

           14% falter...

             7% for others..

Gold's resistance is around $1625....A breakthrough might be the order of the week.?

Mar 25, 2013 1:24PM
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Gold is do for another sharp drop soon. I bet with the next month it will drop again. Im following the short activity being they are very smart people, much smarter than me.

 

I am so glad I am not a gold bug. Stick to dividends people, VERY LONG TERM.

Mar 23, 2013 2:09PM
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Gold readings from the Charts...Now @ $1609.20 pr/t.

 

5 year....High.....$1900.30 per try oz....Summer of 2011

              Low......$  709.50

10 year...High......Same.

              Low......$ 322.10

 

You can be the Judge of what Gold might do OR what you think could happen.?

Resistance seems to be in the 1600-1700 range at the time...?

 

Mar 23, 2013 1:01PM
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As far as gold being a store of value, guess that would depend on who or what you were.??

Many indicators drive the price..Value or devalue of Gold.

 

Probably the most useful reason for owning Yellow is Jewelry...Denotes Wealth and Stature..

That reason alone has been around for Centuries....

Recent industrial applications have flourished and then died for cost of price or better materials.

So that leaves us with allure, Central Banks and pretty much just Greed of others.

 

Hardly a Gold Bug, as it may seem sometimes?...To me just another invesment instrument..

And like many Worldwide, Jewelry is to show that you are not poor...For wife, more then self.

Women like Jewels and Gold....More then Flowers and Candy..Don't let anybody shidt you.

 

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