“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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IamtheREALmario's picture

Not if it is paper gold and the counterparty is adequately hedged with derivatives ... isn't that how the whole dollar based world works now?

chaartist's picture

If only the banking cartel does not control the game. It will come eventually if backed by bigger players like China and Russia in my opinion. I think the current market structure still favors US in regards to Japan if they want to destroy their market if someone threatened to redirect part of pension funds to gold. They are not stupid at math I think when it is about their game and their rules. But I know shit :)

Scisco's picture

It is the common person that is always screwed. If pensions funds tried to allocate 1%, 2% or 5% into gold, I suspect they would do so through an ETF. In turn, it would probably implode leaving the common person up shit creek.

Smuckers's picture

...And all the children will have to learn a new game once rock covers paper.


905ozs's picture

Paper dreams...

secret_sam's picture

Can a pension fund REALLY invest in gold?  I mean...on a practical level.  It'd seem there may be barriers other than understanding which result in the relatively low rate of investment into gold.


PS: "I crush the rush!" -- Phil Anselmo

Fred Hayek's picture

Why not?  It's a tier I asset under Basel III rules.  Can't get better than that.  As long as you get actual gold and not the paper, dead end fraud of an ETF statement.

secret_sam's picture

Does any given pension fund have a vault and a security department?  A fleet of trucks to collect the commodity?  A staff of agents operating internationally who can make the necessary purchases?

SAT 800's picture

look up bullionvault.com on google; it's all taken care of already; and there are thousands of Americans who own gold and silver there; and it;s all real; it;s all there, and it;s very, very easy.  And legal.

SAT 800's picture

The purchases are made at the LBM; which has existed for a long time. (London Bullion Market). All the details are already taken care of.

SAT 800's picture

You can actually put your IRA into one hundred percent real Silver Bullion, Vaulted; allocated; no jokes. I'm not making this up; I've already done it for a couple of friends of mine. Look it up on Google. Bullionvault.com.

secret_sam's picture

Can a pension fund look 'em up and just send a purchase order for $5 billion in gold, you think?

SAT 800's picture

In a case like that I refer you to Kyle Bass and his experience as a fiduciary agent for the University of Austin. He encouraged them to take allocated signature delivery of their gold; which they did. I think $5Billion is not what bullionvault is set up for; but you could ask.

AE911Truth's picture

So how about if a pension fund took delivery of $50 billion in physical silver?

Wouldn't that do it?

secret_sam's picture

Do what?  I don't think it would blow up the price of GOLD, if that's what you mean.

Sutton's picture

They'll put the money into what their NY Overlords tell them, meaning GLD, which actually owns no gold.

Another Japanese investing success story.The last shrewd, independent minded Jap  was killed by my uncle on Iwo.

SmoothCoolSmoke's picture

Wrong..... London Overlords.

fijisailor's picture

No it was that guy they found in the 70s hiding in a cave in Guam who thought the war was still on.  Or else it was my friend Fumi who is a cartographer and sailed his boat around the world.  He bought me drinks all night one time and said he owed it to me because Japan was rich and Americans had bought him everything when America was rich.

Jack Burton's picture

Japanese economic and fiscal leaders believe that just injecting some inflation into the Jpanese financial system can solve a whole host of systemic economic problems?  That reminds one of the old saying about if the only tool you have is a hammer, then everything looks like a nail.

So true in this case. Japan is maintaining one of the highest standards of living in the world even as growth remains elusive. Since population is now moving negative Japan may well get by with a shrinking GDP as less demand from less people shrinks the overall economic pie.

Since older Japanese have saved heavily for retirement and Japanese hold much of their own debt, they do not face troubles like Europe and the USA. With less people going forward then less demand on resources and more of everything for the remaining people might not be so bad a thing. Europe afer the black death bounced back on the back of more land and resources and more value attached to labor. Japan, if well managed, can survive the problem of too many old folks for a few decades and then bounce back with more space, more value to labor, more resources, more food and less pressure on the land in a crowded nation. Their only fear would be outside foreign threats. I suggest Japan build a nuclear force and do just like Russia has. Issue a military policy that says that "First use of nuclear weapons is resevred for the defense forces should any foreign force enter their territory that can not be dealt with by the nation's convetional defense force" First use means tactical nuclear weapons used over a force invading the nations territory.

Safe behind this force, Japan could remain a wealthy prosperous and more long term oriented economy of say 75 million people, instead of searching for population growth to gain GDP growth. Why should Japan give up it's culture and race just to satisfy corporations wanting a bigger market in Japan and a bigger pool of labor at lower wages in Japan?

Japan should go it's own way. It has proven it can compete and survive in a global capitalist system, it just may not be as BIG a nation as a share of world trade. With a smaller population to service who cares.

Thisson's picture

You are looking at everything way to abstractly.  Japanese haven't invested as you claim.  The term "investment" implies that stockpiled resources were consumed in order to produce "capital" which is a fancy word for equipment or infrastructure that will yield more in increased productivity (over time) than was consumed to create it.  This doesn't describe Japan.  Japanese people turned over their stockpiles and received paper receipts for them.  The stockpiles were squandered, not used to produce capital.  Now the chips will fall where they may.

As for Europe, what you describe is also rendered too abstractly.  After the plague hit, there were more natural resources available per capita, so the survivers were wealthier per capita.  The same thing will happen in Japan, but not through proper management.  It will happen as the old people don't receive their pension income and die off earlier than expected, leaving more resources for the survivors.  Japan, a tiny island with limited resources, is not going to succeed through a military strategy against the rest of the world, who are not going to cave in to nuclear blackmail. 

secret_sam's picture

    Japanese people turned over their stockpiles and received paper receipts for them.

Japan DOES have one of the most sophisticated public infrastructures in the world.  That's real capital.

It also has a highly educated population with a strong sense of community and personal discipline.  This is not considered "capital," but LABOR is a very important component of any modern economy.

fijisailor's picture

Nuclear contamination is also another big wildcard in Japan's future.  The truth is being hidden by the govt.

zilverreiger's picture


According to an article on Mineweb, the opening day sale of 3,937,000 oz of Silver Eagles is a NEW RECORD for the 1-day sales of this coin.  This number is 23% higher than the opening day sale in 2012, which was higher still than that of 2011.  So the trend in exponentially higher purchases of Silver coins by the general public is clearly evident.

However, the shocker is this: The opening day sale for Gold Eagles amounted to a dollar value of $82 Million (50,000 oz), while the opening day sale for Silver Eagles was a shocking $118 Million (3,937,000 oz)!  So, Eric Sprott has been right all along, and people are putting as much, if not more, money into Silver as they are into Gold, and the price ratio is still an incredibly cheap 55:1 for Silver.  Amazing.

Thisson's picture

Doesn't matter.  Silver is a real asset and will maintain its value, but it is not a money (it is merely a money substitute) and will thus not gain as much relatively in comparison to gold (which will increase its inherent "money premium")  as debts are destroyed.  You silver bugs are in for a disappointment compared to gold.  Furthermore, you haven't accounted for the significant risk of rising real interest rates as debts are destroyed, which could limit the real gains of both silver and gold.

zilverreiger's picture

sorry forgot to say this is a quote of someone elses silverdoctors comment

ParkAveFlasher's picture

"Money" is an asset substitute. 

And if you understood 1% of that conundrum, your head would explode.

SAT 800's picture

Been doin my homework on this shit for forty years. participated in the 1979-1980 silver bubble. you don't know what your're talking about; I'm lazy; I'm not going to write a book trying to explain it to you. Start reading books. "but it is not a money" is such a stupid statement, it doesn't even really deserve a reply; but I figure somebody might actually pay attention to you, so I did.

secret_sam's picture

What's money?  If silver is money, is wheat flour money also?

It doesn't take a genius to call someone stupid, you know.

Thisson's picture

The silver bubble and the hunt brothers are completely off topic, and have nothing to do with the question of whether silver is money (it is not).  I read plenty of books, which should be obvious since I've already stated an understanding of the relationship between PMS and real interest rates, something that is often omitted from discussions of PMs here on ZH.

SAT 800's picture

Yeah; slowly, slowly the obvious gains converts. one person at a time, probably; but it;s starting to roll.

AnAnonymous's picture

The metal market would explode...

Either Japanese have kamikaze genes, and will take the option that would vaporize their access to goods...

Or they will keep hanging by the teeth, consuming what it is left to consume in this 'american' world put on the path of depletion of resources by 'americans'...

That is such a dilemna. Wooo, you need a fortune teller to tell one option from the other. Especially one knows Japanese are 'american'.

TheFourthStooge-ing's picture

AnAnonymous said:

That is such a dilemna. Wooo, you need a fortune teller to tell one option from the other. Especially one knows Japanese are 'american'.

What a stupid comment.

And that is the same stupidity as ever. As stupid as requesting that a cat who evolved from specific environmental pressures turn immediately into another type of cat due to change in environmental pressure and climb into your wok voluntariously.

FranSix's picture

The 40-year inflation-adjusted average for gold in 2009 constant dollars using shadowstats is ~$1675/oz.  that was three years ago, prior to QE2, ,QE3 ,QE4.

If QE4 is found not to be enough to hold back a treasury market rout, or corporate bond market liquidity trap, then the amount of inflation would probably be double the assumed 17% and come in at 34%.

905ozs's picture

Say Rothschild, I dare you:)

SmallerGovNow2's picture

WOW!  Check APMEX website and look how many silver eagles are out of stock!!!


slightlyskeptical's picture

Wow. Not hard to see which direction this crowd runs.

Conversely, if 1% of the current gold holders were to sell. Gold would also explode...downwards.

The if my aunt had balls thing is basically what this article is saying.

Japanese pension funds will continue to buy Japenese tresuries as that is the only way to keep their system from imploding.

FranSix's picture

This year was the year of dishoarding for bullion holders, much as people would like to ignore it.  In the last month alone, enough gold was sold to cover one year's mine supply, so either contracts were raided from client accounts, or central banks leased more gold again.

Dishoarding only has the effect of providing leverage to an illiquid market for bullion, so the expectation is that price aught to rise.  Secondly prices remained stable because they are trading below their 40-year inflation-adjusted average.

SAT 800's picture

Jesus Christ you can't even understand arithmetic. If 1% of current holders of anything decided to sell, it'd be another down day in the market. The point is that 1% of the Japanese Savers; which represents a lot of people and a lot of dollars, tried to enter the gold market in a dis-orderly manner, eg. all at once; it would cause a price explosion. the point of the story is the relative SIZE of the gold, or silver, markets compared to the savings on the sidelines; by the way; or not entirely, by the way; this also applies to the dollars on the sidelines, here, in the US. Currently in money market funds; bond funds, etc.

slightlyskeptical's picture

Wow. Not hard to see which direction this crowd runs.

Conversely, if 1% of the current gold holders were to sell. Gold would also explode...downwards.

The if my aunt had balls thing is basically what this article is saying.

Japanese pension funds will continue to buy Japenese tresuries as that is the only way to keep their system from imploding.

unplugged's picture

“If 1 percent of their total assets shift to the metal, the gold
market would explode.”

I call bullshit - yet another false alarm.

drivenZ's picture

exactly. Let me know when that shift happens. I won't hold my breath though. 

SAT 800's picture

It's not an alarm of any kind; false or not; it's a comparison in the size of the two markets. Wake the fuck up.

drivenZ's picture

why buy gold when the central bank is buying equities?

jubber's picture

and this from earlier today  China's Gold Volume “Shot Through The Roof” Yesterday Ahead Of Lunar New Year

Submitted by Tyler Durden on 01/08/2013 - 08:18
Reuters report that Asia's physical market has picked up so far this year, with buyers tempted by last week's big drop in prices -- when prices retreated to as low as 1,626 per ounce -- and on demand ahead of the Lunar New Year, traders said. The trading volume on the Shanghai Gold Exchange's 99.99 gold physical contract shot through the roof on Monday, hitting a record of 19,504.8 kilograms, after double-counting transactions in both directions. "Physical demand is very strong," said a Beijing-based trader. "It's a combination of the attraction of lower prices as well as pre-holiday demand." But such appetite could waver if prices recover towards $1,700, he added...


Could get very interesting if anyone tries to frontrun this?

Bansters-in-my- feces's picture

...............................  iF  ..............................................!


sansnobel's picture

The price of gold will do whatever the market riggers of the world(Central Banks) tell it to do.  Just like every other market has.  With an unlimited supply of digital trading media that can be conjured into existence at the drop of a hat and be used working in coordination with other Central Banks, they can pretty much do whatever the fuck they want with any market.  The only thing that will bring the system down is a collective effort by anybody with a fucking bank account going and simultaneously withdrawing at the same time.  But they are very good at maintaining faith that everything will be alright, so the music goes on until people reject the communist Oligarchs which I don't see happening anytime soon.  One thing about this little game of modern day slavery is that as long as they continue to give the masses what they want they will gladly be humble little serfs that don't mind an occasional jackboot on their necks.

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: