‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins - May Enhance Returns 5.9 Times

Tyler Durden's picture

From GoldCore

‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins - May Enhance Returns 5.9 Times

Gold is trading at USD 1,718.90, EUR 1,282.70, GBP 1,099.30, CHF 1,587.5, JPY 133,650 and AUD 1,679.4 per ounce.
Gold’s London AM fix this morning was USD 1,70.00, GBP 1,098.76, and EUR 1,284.54 per ounce.
Yesterday's AM fix was USD 1,744, GBP 1,114.88, and EUR 1,296.08 per ounce.

Cross Currency Rates

Gold is marginally lower in most currencies (except the CHF and AUD) extending the 1.4% fall seen yesterday.

Gold traded below the 100 day moving average at $1,726.33, which it broke below yesterday and will need to rise above the 100 DMA in order to resolve the short term technical damage done.

Gold’s continuing failure to make strong gains given the heightened monetary and systemic risk continues to surprise many in the market. It may be due to further profit taking after last week’s 4% gain, 2011 year end book keeping and booking profits after a 20% gain and increased risk appetite in the wider markets.

Continuing fears about Europe's debt crisis and Standard & Poor's warning that it could downgrade euro zone nations are supporting gold at these levels as it appears to again be consolidating.

The rating agency's warning it may downgrade 15 countries, including Germany and France, came hard on the heels of a Franco-German initiative to enforce budget discipline across the 17-member zone through EU treaty changes.
Market participants may remain tentative ahead of the EU summit in Brussels on Friday where there will be attempts to create further fiscal integration. Failure at the summit could lead to a sharp increase in volatility and which should be supportive of gold and would again be supportive of gold in the medium and long term.
The likelihood of further downgrades of hitherto risk free government debt, including France and even Germany, is bullish for gold. Gold cannot be downgraded or debased by politicians or central banks.

Indeed, the sort of economic and political mismanagement we see today is what gold thrives on and should lead to further gains in 2012.
Gold is a safe haven and a hedge against political, financial & economic mismanagement and stupidity.

While the western public does nor realize this - most major banks bullion, commodity and foreign exchange analysts do.

Yesterday we reported how gold in euros was one of the 2012 top trades of Bank of America. Today, Deutsche Bank said in a report that their conviction trade is long precious metals and especially gold.

Negative real interest rates and a high U.S. equity risk premium will drive demand for gold they say.


Gold in Japanese Yen – 1970-2011 (Nominal Yen, Not Adjusted for Inflation)

The government and the department of finance of Japan also understand the value of gold.

Japan will reward investors who buy reconstruction bonds with half an ounce of gold, an added incentive that could boost the return by nearly six times according to Japanese Finance Minister Jun Azumi.

Individual investors who purchase more than 10 million yen ($129,000) in the debt with a 0.05 percent return and keep it for three years will receive a gold commemorative coin weighing 15.6 grams (0.55 ounces), the Finance Ministry said in Tokyo today, worth about $948 based on current prices for the precious metal.

The offer suggests the return could be boosted to 89,000 yen should gold prices remain at current levels, more than the approximate 15,000 yen one would receive from the bond.

The coupon on conventional three-year retail government debt to be sold on Jan. 16 is 0.18 percent. 10 year debt remains near multi record lows of 1%.

Silver coins weighing 31.1 grams issued as 1,000 yen currency will be distributed to those who own more than 1 million yen of the bonds, the government said. The coins will be offered for debt going on sale in March.

All investors receive a thank-you note from the minister, who showed his to reporters in Tokyo today as proof of his purchase.

Chief Cabinet Secretary Osamu Fujimura also bought the bonds, Azumi said, without saying how much.

This is a sign that the Japanese government like governments internationally is very concerned that they will not be able to sell their government debt.

This is especially the case given that they are engaged in monetary easing, foreign exchange intervention and currency debasement.

It looks like a desperate attempt to bolster demand for their debt which is understandable given the poor state of Japan’s finances and the recent IMF warning that Japan’s debt could “quickly become unsustainable”.

Will a spoonful of gold and silver help the prodigious amount of debt medicine go down?

For breaking news and commentary on financial markets and gold, follow us on Twitter


(Reuters) -- Gold steady; S&P downgrade warning weighs

(MarketWatch) -- Gold extends fall as dollar rises on S&P news

(Bloomberg) -- Japan's Gold-for-Bonds Offer Could Boost Return By 5.9 Times‎

(Bloomberg) -- Japan Offers Gold Coins to Bond Buyers

(MarketWatch) -- Afghanistan opens bids for gold, copper projects


(Bloomberg) -- Louise Yamada Sees 'Rallies and Retreats' For Safe Haven Currency Gold

(Bull Market Thinking) -- CEO of $16B AngloGold Ashanti: “Major Buyers Are Finding It’s Hard To Get Physical Gold”

(Run to Gold) -- European Bank Runs And Underestimated Physical Gold Demand

(ZeroHedge) -- It's Time To Give Up On Mainstream Economics

(Got Gold Report) -- Silver in Giant Flag or Pennant Formation

(FT) -- ECB holds the key to next gold rally

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jcaz's picture

Ah, the golden toaster plan- brilliant!

Nothing says your paper is shit better than gold.....

Harlequin001's picture

So let me get this straight, I lose $129,000 on the worthless paper (that can't be sold without a gold tag to tempt me) but gain half an ounce of gold in the process? The BOJ can take then a fraction of this new money raise and use it to short the same gold they're tempting me with OR alternatively if I can spend my $129,000 on gold bullion, shove the price through the roof and lose nothing... Nah, pure idiocy that one...

Sounds like a bond traders bargain. Sign me up...


Long-John-Silver's picture

$129,000 in $1 bills contain 1.650 million BTU. If you are freezing to death Gold can't keep you warm.

Harlequin001's picture

Damn, wish I'd thought of that before buying all this gold...

How will I ever afford the oil, or the coal?

When you think about it though, if I'm going to pick up some poor fools Aston for a song when he pukes it, it should have a decent heater in it eh...

sqz's picture

Looks like Kyle Bass was on to something with Japan sovereign debt issues. The timing of this smacks of desperation.

zaphod's picture

The Japanese can not affort real interest rates due to their high debt load.

So this means that they plan to service the interest on said debt by selling off their gold holdings.

Yes I'd call that desperate....

Oh regional Indian's picture

Dumb plan. And dumber still the people who buy into it.

Three years from now, all promises will be dust. Imagiine how much gold and silver you can get for 129,000 dollars today.



LawsofPhysics's picture

Even better, imagine being paid for your services from these sheeple tomorrow.  Hhmm, maybe the plan isn't so dumb.

bernorange's picture

Edit: whoops - I misread the deal.  Never mind...

TorchFire's picture

such a callous misuse of the tradition of desire for a silly relic

spankfish's picture

Can I be the first to say "Gold Bitchez"?

I think I need to buy a gun's picture

will ben do that for treasuries in my money market?

cowdiddly's picture

You have'nt heard about the new .002 gram tungsten commemoratives from the U. S. Mint that witll be issued with evey 100K purchase of 30 year T bonds? Awesome looking coin with Guantanamo on the front and Dick Cheney shooting quail on the obverse.

Help Is Not Coming's picture

The absolutely crazy thing is that the US mint can mint a platinum coin with any dollar amount on the coin of their choosing. During the debt ceiling debate it was proposed that the US Mint mint several "trillion dollar" platinum coins and then give them to the Federal Reserve as collateral for the FRN. Since it would be a coin minted by the US Treasury it would be lawful money and the US gov't could spend that amount without going over the debt ceiling since they wouldn't have to borrow that money. Strange days indeed.

Robslob's picture



But but but...Gold ISN"T MONEY?


Retarded governments worlwide leading people to the slaughter for centuries....

bingo was his name's picture

Welcome back to the gold standard

MachoMan's picture

Exactly.  Inherent in the proposition is the notion that gold is money, has value, and should be valued by bond purchasers...  The problem, of course, is that the proposition is inherently self-defeating in that if the government recognizes gold for what it is, then there is no reason for anyone to purchase the bonds in lieu of gold.  Awkward.

Azannoth's picture

So if I am interpreting this correctly the Government of Japan sees Gold at $260,000 per oz. in 3 years time?

MsCreant's picture

No, they figure they will be dead so they won't have to pay back anything at all.

Edit: True story, had a father in law run up a credit card he never had before a month before he died. 

Harlequin001's picture

yeah but these gold coins will glow at night for around 120 million years I think...

Azannoth's picture

Depleted Uranium is the new Tungsten in Japan :) Gold in Japan even more Shiny than anywhere else in the world get it while it's 'hot'!

papaswamp's picture

$129,000 for 1/2 oz?.....just buy the gold outright and skip the loss.

AngryGerman's picture

Japanese gold coin has dragon on one side and samurai on other - mighty gold coin!

MsCreant's picture

Better than the one with the dragon on the front and the queen on the back. What a buzz kill.

AngryGerman's picture

don't say that! I often fanatsize about the queen. I keep on imagining:

Her - "I am so amused, I am so amused, I am sooooooo amused!"

Me - "For you and England! Yeah biatch!"

mick_richfield's picture

Lie back and think of the Illuminati.

Kobe Beef's picture

Dear MSCreant,

Try Luk Fook Jewelry or other dealers in Hong Kong. They have stunning dragon designs on rounds sold by the gram. Singapore often mints fine dragon designs as well. I too am tired of Queen Elizabeth's ugly mug on all my gold coins. Off with her head! hahaha




flattrader's picture

Luk Fook's website sucks.  It's all fooked-up.

Any idea where the rounds might be?

They do have a presence in San Fran...but, I'd rather not make the trip.

paratrooper325's picture

The whole debt buying thing is, and always will be, a very stupid endeavor. For instance, lets say my neighbor comes to me and opts to sell me his credit card debt with the promise that he will pay me more back by the time he has payed it off. Sound like a good buy? NOPE. Do what papa said, just buy the gold.

bullionbaron's picture

Interesting to see some similarities building between the last Gold bull market and this one. Potential for Iran & and an energy crisis to once again drive Gold to magnificent highs?


edmondantes's picture

recommendations from Deutsche Bank and Bank of America are a major negative... always best to do the opposite of what is proposed by this gang of lying thieves

ThisIsBob's picture

Stole the concept from the Cracker Jack company.

fonzanoon's picture

The thought process with money printing seems to be the world ends up awash in paper money and becomes worthless. How does that mesh with the fact that the middle class is getting poorer by the day and the lower class is growing substantially as well? There may be a lot of money in circulation but it seems the lower middle class is desperate for some of it? How does that end up being hyperinflationary?

MsCreant's picture

Hyperinflation is poorly named. It is a lack of faith in the currency. It becomes less and less trusted until finally there is a race to get out of it and into something that is trusted. In that race spiral it becomes worth less and less as more of it floods the market. Also, the currency will come flooding back home where it has been stashed in foreign destinations, where it is dumped rapidly, going into the system trying to buy something, anything, of value. Domestic dollars compete with those dollars and it takes even more and more of them to get stuff. 

Inflation happens because of printing. Hyperinflation is a loss of faith in the currency once folks think the currency is shit.

fonzanoon's picture

I do believe that to be true, but if you use the U.S as a test case for that. It is pretty clear that 99% of the population do not end up seeing any of this money. So when it comes flooding back it will go to a tiny percentage of the population. The 99% will still be on food stamps begging for that next dollar. On a related note if every country seems to be in a financial mess who are the owners of the massive amounts of dollars right now that will eventually send them back here when they lose faith?


MachoMan's picture

I'll quote spitzer and say that the amount of printing necessary to cause hyperinflation has already occurred...  Think gonzalo lira - failed auction...

The Proletariat's picture

The value of $1 is worth less and less and less and so on......

fonzanoon's picture

"The value of $1 is worth less and less and less and so on......"

Agree completely. It just seems that the masses in this case would not lose faith in the dollar, they would be desperate for more of them.

HamyWanger's picture

Only libertarians say that inflation is catastrophic. 

Actually, it isn't. It is just a redistribution of wealth, namely a transfer from the higher-middle-class and the improvident rich into the pockets of the government, and the poor by ricochet.

Given that most Americans don't have liquid savings (their holdings are composed of real estate, debt and Social security/retirement income wich is and will be adjusted for inflation), they won't see anything. 

Only the extreme minority of savers will see their holdings melt, but as an even more extreme minority has a clue what inflation is, and as the banks will offer everyone falsely CPI-adjusted contracts, there won't be any public uproar. If you go out of the microcosm and table jerk of Zerohedge and Bloomberg, nobody gives a fuck about Bernanke or QE2. 

Inflation has been the solution chosen by all European rulers across the XXth, XIXth and XVIIIth century when facing economic difficulties for a reason. It is much more popular to the public than upright defaults and liquidations of big and well-known companies. Also, inflation never menaces national security, as it tends to reinforce the State and the military at the expense of the people. Even hyperinflationary vicious circles are not a danger for States: the ruler may be toppled in a coup, but goverment services always remain intact. Contrary to default which would dramatically reduce its size and power.

Henry Chinaski's picture

Hamy, you are right to a certain degree.  The slow simmer of inflation was a nice racket for a while.  Unfortunately TPTB got greedy, arrogant and out of control.  The frenzied fraudulent pillaging of the middle class has gone too far.  Nobody even tries to hide it anymore.  The system is both unsustainable and unstable.  A phase shift seems unavoidable, not because of inflation, but because of people's apostacy from natural law.

When my children were born, they received gifts of savings bonds from grandparents and other friends from the greatest generation.  A few years ago, I woke up to the inflation racket.  I exchanged their series E bonds for the equivalent (several tubes) in silver Maple leafs at $15/oz.  My children are old enough to understand basic economics and the inflation racket.  I will pass along to them a healthy stack of real money some day and no person or goverment will know about it.

JamesBond's picture

so the claim is that the debt matures at .05% and gold over 5% and the BOJ wants you to purchase the debt.

drunk japanese business men are a hoot at midnight don't ya know! 

Matt's picture

You don't get it. They don't want us to buy the bonds. They only want Japanese nationals to buy the bonds. They specifically want them to be unattractive to foreigners while simultaneously rewarding their citizens for patriotically buying more bonds. That way their gold sales only go to their own citizens, and it all stays in Japan.

orca's picture

According to rumours, the gold used for the comme...cumminge... special coin was recently transferred from the special Tepco storage facility at Fukushima. A Finance Ministry spokesman declined to comment on reports that the coin is that special it even glows in the dark.

thorgodofthunder's picture

Just shows how gold is latest fad- in 1999 you would have been given a share of pets.com, in 2005 a free month interest on your sub prime mortgage, in 1955 a free toaster when you opened a bank account.

Technology is the new gold. The rocks themselves have no further use.

MsCreant's picture

How do you store the value the tech embodies?

mick_richfield's picture

Actually, I think silver is the new gold.

youngman's picture

Well with the Cesium in the baby food now....Japan won´t be around to much longer as all the kids will be dying....

ziggy59's picture

Should get the toilet paper aka bonds for free after spend 129000 on pms!