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“If Just 1%Of Japanese Pension Assets Shift Into Gold, The Gold Market Would Explode”

Tyler Durden's picture


Last night we reported that in the encroaching attempt to globalize the fiat ponzi regime, in Japan's latest rush to crushTM (sounds even better than race to debase) its currency it would proceed to monetize even more debt, only not its own debt - a strategy that has failed miserably to stimulate inflation for the past 30 years - but that of Europe.

So far so good, and perfectly expected in a monetary lunatic asylum in which coining money without an appropriate collateral backing is actually considered sound monetary policy by Nobel prize winners.

What gives us some hope that there may be at least one sane voice left in the wilderness is the far less trumpeted news overnight that "Japanese pension funds, the world’s second-largest pool of retirement assets after the U.S., will more than double their gold holdings in the next two years as the new government pushes for a higher inflation target, according to an adviser to the funds. Assets held by Japanese pension funds in gold-backed exchange-traded products may expand to 100 billion yen ($1.1 billion) by 2015 from less than 45 billion yen at present." The reason for the move is fear that Abe is actually able (unlike last time when his failure was accompanied by an inexplicable case of career-ending diarrhea) to hit his goal of 2% inflation, without in the process sending bond yields so high all tax revenue goes solely to cover interest expense on the JPY 1 quadrillion pyramid of debt and rising. Which, incidentally, according to many traders is the reason for the move higher in gold prices today.

From Bloomberg:

Mitsubishi UFJ Trust and Banking Corp., which introduced Japan’s first gold ETF in 2010, expects assets held in the product to double over the next several years from 26.2 billion yen as of Nov. 30. Global investors are holding a near-record amount in gold-backed ETPs that are valued at $139.6 billion, data compiled by Bloomberg show.


Assets held by corporate pension funds in Japan amounted to 72.24 trillion yen as of March 2012, declining 0.9 percent from a year earlier, according to Yasuo Sugeno, director at Daiwa Institute of Research in Tokyo. Of the total, about 72 billion yen were allocated to commodities including gold through hedge funds, he said Dec. 10.


Government Pension Investment Fund of Japan, the operator of the world’s largest pension fund with 113.6 trillion yen, stays away from commodity investment as 67 percent of their assets were allocated to Japanese bonds, Sugeno said.


Japanese pensions oversee $3.36 trillion, according to human-resource
and consulting services company Towers Watson & Co.
pension funds in Japan will diversify 72 trillion yen in assets after
domestic stocks produced little return in the past two decades,
according to Daiwa Institute of Research.

So after the rotation, paper gold holding will double to a whopping... 0.03% of all pension fund assets! Now imagine what happens to the price of gold if Japan does indeed succeed in generating inflation, and pension funds scramble to push 1, 2, 5% or more of their assets into gold. Sure enough:

Perhaps it is time for the punditry and the chatterbox media to start considering what happens not when the much anticipated rotation out of bonds and into stocks, which has not happened for 4 years now, and won't, at least not until the government bond bubble finally pops which will only happen when the central banks finally lose control, but what happens if even a tiny amount of the global pension capital allocated to bonds and/or equities, is rotated into gold.

“Pension money invested in bullion is ‘peanuts’ at the moment,” Toshima
said. “If 1 percent of their total assets shift to the metal, the gold
market would explode.”

Could not have said it better ourselves.


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Tue, 01/08/2013 - 15:11 | 3133702 ivars
ivars's picture

Silver chart I tried to post but messed up and image was missing:


Quaterly  expires has marked 9 out of 10 trend changes over last 2 years. Now we are bottoming out:

Tue, 01/08/2013 - 15:15 | 3133723 cranky-old-geezer
cranky-old-geezer's picture



at least not until the government bond bubble finally pops which will only happen when the central banks finally lose control,

Tylers appear caught up in that skittle-shitting unicorn fairytale fantasy that central banks will lose control of bond markets someday.

They never will.  Not when they have a printing press, and it'll never be taken away.

Even after the currency collapse, the only "when" in the equation, central banks can still print and buy bonds, keeping prices up and yields down.

Neither bonds nor currency willl be worth anything, but the bond bubble is maintained quite nicely, all the numbers look fine, all the charts look fine, just like normal. 

Nobody talks about currency debasement and ultimate collapse.  Not govt, not Wall Street, not MSM, not hedge funds, and no, not Tylers either.  It's the "taboo" subject it seems, even here on ZH.

But it's THE biggest threat to America now.  Maintaining all these financial bubbles takes enormous currency printing, leading to debasement and eventual collapse.   When it happens to USD, that's it for America, even though bubbles are doing quite nicely thru it all.

Tue, 01/08/2013 - 15:54 | 3133831 secret_sam
secret_sam's picture

    Even after the currency collapse, the only "when" in the equation, central banks can still print and buy bonds, keeping prices up and yields down.

I think it's a mistake to think of collapse as an "event" rather than as a "process."  The most commonly held view among posters here seems to be something like: "one day, we 'Merkins will wake up and the grocery store won't take our dollars anymore and it'll be chaos."

That's a pretty silly way to envision the future, in my opinion.  I don't think the Saudis or the Chinese are suddenly going to dump all their dollars, either.

The question is: GIVEN that we know what the current strategy is being used by the Fed (and FEDGOV), what would be the most sensible CHANGES they'll make to that strategy when sufficient market pressure builds to force their hand?

I suspect the most likely result would be either maintenance of the existing structural regime while floating a new currency (strongarm the rest of the world into accepting our conversion offer) OR a complete nationalization of the US Banking system.

These are fairly similar outcomes in principle, but the relative groups of winners/losers for each outcome would be very different.

Tue, 01/08/2013 - 19:00 | 3134398 Ghordius
Ghordius's picture

collapse as an "event" rather than as a "process."?

A currency is like a bridge. Too much load translates in a chance of collapse.

A risk.

Like driving twice as fast as the others. Or four times faster. An accident is not a given. Just likely.

Hyperinflation is not just a lot of price rises. It's a loss of faith. It's a psychological moment

Tue, 01/08/2013 - 19:14 | 3134433 secret_sam
secret_sam's picture

Well, the hyperinflationary period in Weimar Germany lasted for years.  Same with Zimbabwe.  In both those examples, there were alternative transaction media available to the commoners who were giving up on the State-defined fiat.

How similar are either of those cases to the management of the US dollar?  Surely there must be a better example of a global reserve currency whose value went to zero overnight...except...there isn't.

(Note: I am not saying that it is *impossible* that we 'Merkins will wake up one day to find we can no longer buy groceries with FRNs.  I am saying that I believe the possibility is vanishingly remote compared to the far more likely outcomes I mentioned above.)

Tue, 01/08/2013 - 18:59 | 3134403 cranky-old-geezer
cranky-old-geezer's picture



What market pressure?

Tue, 01/08/2013 - 19:15 | 3134439 secret_sam
secret_sam's picture


How about refusal to transact business in US dollars because the other sovereign currencies are all so much harder?

Tue, 01/08/2013 - 16:41 | 3134004 dogbreath
dogbreath's picture

I have wondered why there hasn'e been more accumulation by individual japanese.   The funds are all controlled and won't tip the boat over so no surprise there.  The individual japanese whats holding them back, they  should be able to dent the market or maybe deflation is lulling them into a false sense of improving personal finnances.   If things/stuff is getting cheaper why buy Pm's.

Anybody local there that might have an insight.

Tue, 01/08/2013 - 17:44 | 3134196 sessinpo
sessinpo's picture

Love those "What if?" threads today TD. What if just 1% more invested in gold. What if corporate earnings have topped out?


Can we members add a few?

What if government people started telling the truth?

What if bankers stopped doing corrupt things?

What if liberals stopped sucking the country dry?

And of course my favorite. What if Hefner died and left me his playboy empire?

Tue, 01/08/2013 - 18:15 | 3134288 secret_sam
secret_sam's picture

You think the financial industry is all made up of LIBERALS?

Tue, 01/08/2013 - 22:27 | 3134890 El Hosel
El Hosel's picture

 Don't forget the "Ponzi mans gold"...  Tungsten Bitchez

It only takes 100 hundred of those Trillion Dollar Platinum Coins (made of the finest Tungsten) to solve all our debt problems.

Wed, 01/09/2013 - 01:18 | 3135308 resurger
resurger's picture

Go Japan

Wed, 01/09/2013 - 03:19 | 3135506 yang46
yang46's picture

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Wed, 01/09/2013 - 03:42 | 3135539 Jam Akin
Jam Akin's picture

Dang Yang - did you take a wrong turn at Pismo Beach to wind up here or something?  WTF?

Wed, 01/09/2013 - 03:50 | 3135542 akak
akak's picture

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Wed, 01/09/2013 - 07:01 | 3135713 Jam Akin
Jam Akin's picture

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