Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Lesson from Japan for Gold and Silver Investors

Commodities / Gold and Silver 2011 Apr 01, 2011 - 03:23 PM GMT

By: Jeff_Clark

Commodities

Best Financial Markets Analysis ArticleJeff Clark, BIG GOLD writes: It feels a little callous writing about Japan with respect to precious metals after the country suffered such a terrible tragedy. However, I think it’s worth discussing because there’s a lesson in it for all of us. In fact, I think the moral could be couched in terms of a warning.


Japan’s Background with Precious Metals

It’s commonly known in Japanese culture that citizens harbor gold to protect against unforeseen events. The gold isn’t sold unless it’s needed for an emergency. With respect to the Japanese government, the country’s central bank is the 8th largest holder of the metal (including the IMF and GLD). Beyond investment, Japan represents about 6% of worldwide gold fabrication (excluding investment demand), the majority of which is in electronics. Scrap recycling has been heavy in recent years, while jewelry demand is low.

Regarding silver, the tiny island represents about 9% of global demand. Industrial uses comprise the biggest part of that, which includes the automotive industry, construction, medical uses and solar. Jewelry and silverware have minimal end-use, and photography, like most everywhere else, has been falling heavily.

Japan’s Trend with PMs

While the percentage of Japan’s buying to worldwide demand won’t drastically change in reaction to the recent disasters, they, like several other countries, are pursing another tactic to get minerals. The government is considering revising its mining law, specifically when it comes to seabed mineral exploration and extraction. This is noteworthy because Japan hasn’t touched its mining law in 50 years. To be sure, revisions will be stricter for permitting and monitoring, but the process will be streamlined for Japanese companies.

Why now? As an executive at Mitsubishi Materials put it, “it’s an issue of national interest” because China, Russia, and South Korea are already exploring parts of the country’s exclusive economic zone. They are undoubtedly feeling the pressure of not only wanting what they think is rightfully theirs, but also of wanting to capitalize on high metals prices.

The Lesson from Japan

Premiums for gold and silver there have risen in response to the disasters, which isn’t surprising. Japanese investors scrambled for physical metals after the earthquake, immediately pushing premiums to three-year highs. And it wasn’t just buyers in the earthquake, tsunami and nuclear-plant zones; those in less affected parts of the nation have been rushing to buy precious metals, too. The end result is that available supply has been glutted.

The reactionary buying in Japan could not just support metals prices, but push them higher. This is certainly due to the draining of supply, but also because it’s complicating delivery and exacerbating fabrication problems. The country is a net gold exporter, but there may not be many planes and boats loaded with bullion leaving ports anytime soon, given that many modes of transportation are down and the distribution of more urgent food and other supplies is complicated.

This could dry up gold supplies elsewhere in Asia, as Japan exported 2.7 million ounces last year. While this is only roughly 2.3% of global supply, these ounces are concentrated in Asia, a region that has already seen many countries’ citizens hoarding precious metals. If supply becomes scant across Asia, it’s easy to see how this could light a fire under prices.

As Mark Pervan, head of commodities research at ANZ, said, "This is a buy-on-the-dip opportunity. Investors, not just Japan but globally, have been looking for a trigger to get back into the market. The rise in premiums in Japan could be it."

The lesson is this: When disaster strikes, it’s almost certainly too late to buy. Not only will you pay a higher premium, you may have difficulty getting your hands on bullion. You have to purchase your insurance before adversity hits.

And the warning is this: We saw how supply dried up and premiums skyrocketed during the market meltdown of 2008. Europe saw the same result when Greece imploded. We’re now seeing it happen in Asia due to Japan’s woes. We keep seeing this picture repeat. While no one wants to bet on calamity, is the U.S. really immune from trouble? Are you?

Even if no natural disaster strikes North America, there’s a certain hazard that’s inescapable at this point. The abuse being heaped upon the U.S. dollar has not fully played out. Sooner or later the decline of the mighty greenback will affect almost every area of your life. In fact, what does your day involve that doesn’t require money? Eating, showering, driving, working, shopping, entertainment – all of these will be grossly impacted by the demise of the currency unit used in this country.

The monetary base continues to explode. With no fanfare, it set another new record last week – $2.35 trillion. It’s up 18.7% just since New Year's eve, and 39.2% since December 2008. These actions will have consequences. They will lead to a monetary earthquake.

Your heart went out to the people of Japan when you saw the pictures of the devastation from the earthquake. Will you be ready when the currency earthquake hits here? One of these days it’ll strike, and then it will be too late to buy.

I hope you have sufficient asset protection to withstand the monetary storm that’s building off our coast.

[That asset protection is easy to come by – by loading up on gold, silver and large-cap precious metals stocks that can weather any economic storm. And in the meantime you’ll make handsome returns… like the 90.4% gains Jeff secured for his mom’s IRA, and his subscribers’ portfolios. Read more on how he does it and how you can profit.]

© 2011 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in