CLSA Breaks The Wall Street Mold: Sells Japanese Equities To Buy Gold

Tyler Durden's picture

In a world in which one bank after another has scrambled to downgrade its outlook on gold, both before the recent bank CEO huddle with Obama last Thursday - the day the bottom fell out of the gold market - but especially after, when the real onslaught on gold truly started, it has been an outright blasphemy for the sellside to even hint at having a bullish outlook on gold. After all, how dare someone allocate capital to the barbaric metal at a time when the US is recovering nicely (it's not), and when the US currency is one again deemed safe (with the Fed diluting its monetary base by 3% per month every month until the end of 2014 and likely forever, it isn't), any deviation from this latest script which desperately attempts to push savers out of the safety of gold into the fiat paper, where the proceeds are invested into stocks or simply spent (a la what happened in Cyprus and the latent fear of deposit confiscation everywhere in Europe), is not permitted. Yet this is precisely what CLSA's Chris Wood, author of the famous Greed & Fear, which is never afraid to be contrarian or to break the lemming mold, has done. His brief take on the recent gold plunge? "This is a buying opportunity too good for investors to miss." Buyers of physical gold everywhere in the world agree.

From Chris Wood's Greed & Fear:



The fun and games this week has been in the gold market. As discussed here last month the risk of a break of the key technical level of US$1,520/oz has now eventuated. Rather than viewing this as confirmation of the end of the gold bull market, investors should see this as a massive buying opportunity while also being aware, based on the technicals, that gold could trade down to the US$1,200/oz level. Still GREED & fear would resume buying now and buy more if gold falls further.


As might be expected, the gold bugs are alleging an attack on gold by the establishment to break the 12-year long bull run in bullion. GREED & fear has no insight on this point; though it is certainly the case that the sell side, led by a famous investment bank, has been making the bear case for gold all year. This bear case makes sense for those who believe the American economy is “normalising” and that Billyboy Ben will be ending quanto easing and resuming monetary tightening earlier than the market currently expects. Still GREED & fear does not believe in such “normalisation”, nor should investors.


Indeed the reality, as discussed at some length in the latest Asia Maxima (The conceit of central bankers, 2Q13), is that central banks are competing to become ever more unconventional. This is best reflected in the revolution at the Bank of Japan. But it is also increasingly evident, as discussed here last week, that Flexible Mario at the ECB is itching to become more unconventional if and when Berlin lets him.


For such reasons this is a buying opportunity too good for investors to miss. This is why GREED & fear will today add another five percentage points to gold bullion in the global portfolio for a US dollar-denominated pension and will add more if gold declines to the US$1,200/oz level as is quite possible given the technicals. This will be paid for by selling the investment in the Japan long-only portfolio. GREED & fear remains of the view that the Tokyo market will rally further but Japanese equities have become a very high beta story, courtesy of the accomplished gaijin handler Kuroda, and therefore are not really appropriate in a pension portfolio.


Meanwhile amidst all the media blather in recent days about gold leading the decline in commodities on the back of the weaker China growth data, GREED & fear would like to reiterate one critical, albeit elementary, point. That is that gold is not a “commodity” but money. Indeed gold is the purest form of “money” available not contaminated by the current fiat paper system, a system increasingly corrupted by the manipulation of the high priests of paper money, otherwise known as “central bankers”.


If this is the “big picture”, GREED & fear will admit to a certain surprise that gold has broken down over the past week rather than a month or two ago when the US data was better. For if hopes of normalisation in America have been driving the trade gold should now be less vulnerable as the trend in American data has clearly deteriorated in recent weeks; be it employment data, retail sales or the ISM series. Thus, the IMS Non-manufacturing Index fell by 1.6 points to a seven-month low of 54.4 in March. While US retail sales declined by 0.4%MoM in March, the worst decline in nine months. Indeed retail sales rose by 2.8%YoY in nominal terms in March, the slowest annual growth since November 2009, and are up only 1.3%YoY in real terms.


It is also bizarre that gold should have cracked after the Bank of Japan has just committed to a far greater monetary base expansion, relative to the size of the Japanese economy, than any manoeuvre so far attempted by Bernanke. Thus, the BoJ plans to double the monetary base from Y138tn or 29% of GDP at the end of 2012 to Y270tn or about 54% of GDP by the end of 2014. By contrast, the US monetary base has expanded from US$840bn or 6% of GDP in mid-2008 to US$2.9tn or 19% of GDP in March. Indeed the BoJ aims to increase its balance sheet by Y5.2tn (US$54bn) per month in 2013, equivalent to an annualised 13% of 2012 GDP. This compares with the Fed’s current US$85bn/month balance sheet expansion, which is equivalent to an annualised 6.5% of 2012 US GDP.



This is why the chart of gold prices in yen terms peaked as recently as 9 April and why macro traders willing to leverage should use the current correction to buy gold by borrowing yen. This to GREED & fear is now a much more straightforward trade than shorting the yen against the US dollar since GREED & fear continues to believe that the Fed is not about to end or even slow quanto easing, let alone raise rates from zero.

Meanwhile, investors should also keep an eye on the extent of liquidation in gold. The most important area to watch here is the gold ETFs, given the recent popularity of investors in this supposedly “user friendly” vehicle. Thus, total gold holdings by ETFs tracked by Bloomberg surged from 0.5m oz in 2004 to a peak of 84.6m oz on 20 December 2012 and have since fallen by 8.6m oz or 10.2% to 76m oz, with most of the decline seen in the past two months.


As for the outstanding speculative short positions they are still quite high though not as high as the peak reached in February. Thus, speculators’ gross short positions in Comex gold rose from 7.4m oz at the end of 2012 to 13.1m oz on 19 February, the highest level since July 1999, and were 11.7m oz on 9 April.

* * *

Finally, long after the current brief gold correction is long forgotten, and gold is trading at fresh all time nominal and real highs, we wonder: just how many rogue Goldman and/or Morgan Stanley and/or JPM traders will be charged by the CFTC for having put on a massive gold short derivative position on their books, and which they kept adding to only to see the market finally blow up in their face and cost their firm untold millions in losses, which nobody, nobody had any idea about, and which was solely at the behest of the, appropriately named, rogue trader... Just like this fine young gentleman from Morgan Stanley Goldman Sachs.

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widget's picture

Gold/silver manipulation story going mainstream on CBC tonight *knock on wood*

xtop23's picture

I don't think there is anyone out there with an IQ over 85 that isn't buying this dip in physical. 


troublesum's picture

I have an IQ of 86 and I agree with this stament...

Divided States of America's picture

He who sells first, sells best......

especially when shiny nuggets are on sale too.

CLSA has always been prescient in their calls.

Harlequin001's picture

'It is in my view no coincidence that this hit occurred right at the start of the second quarter and not at the end of Q1.. It is my belief that someone took down the gold price deliberately at the start of the quarter, on a Friday so it would show up on all the technical weekly charts, that having three months left on the quarter that the price will remain low past the end of the month so it shows up on the monthly charts and that next month will see the start of another run back up to around $1800 for gold and $35 for silver before we have a further correction before gold runs up to $3,500. In my view you have possibly until the end of April, possibly May at the absolute latest to buy your gold and silver at these prices, because the banks will want the price to be considerably higher when the reporting (and the bonuses) begin at the end of Q2.'

It matters not what the charts say, the bull run in gold will not end until they stop printing money. Period.


Canadian Dirtlump's picture

Reports confirm that 90% of Canadian and US citizens had their IQs re valued by their repsective central banks to 84.


In other news, I'm buying silver with both hands this week. I'll be heading to albern coin today for another round of buying. RCM wood bisons for the princely sum of 28.15 canadian cash and carry LMAO!


I'd have bought maples but they are selling them for 27.15, 3 week delivery.

Arius's picture

not necessary manipulation ... there is a possibility of a few FAT FINGERs!

Canadian Dirtlump's picture

back when I worked at a trading desk I was written up thrice for wearing catcher's mitts on both hands while trading.

Diogenes's picture

As long as Helicopter Ben and Dishonest Abe are in control  it is hard to see how the long term prognosis is anything but UP. In the short term who knows?

SAT 800's picture

News reports of large amounts of personnal gold; jewelry, etc. being sold by Japanese Individuals; "because the price went up in Yen"; thereby demonstrating a mass IQ quite a bit below 85. Do they really think the Yen is going to increase in value? What do they think? I don't know. But that's the news report.

Lost Wages's picture

I hope that documentary will be online & viewable outside of Canada.

Cacete de Ouro's picture

These Wall Street cheats met the OBummer in the Roosevelt Room of the Whitehouse at 11am last Thursday.

Hang 'em high!

JohnG's picture



This is a godamn conspiracy, plain and simple.  Motherfuckers.

Don't get me wrong, I am buying with both hands and feet, but CONSPIRACY?  With Oshithead in the center of it?  Just wrong, so fucking wrong.

Makes me wonder what the fuck is coming next and how can we see it before it hits us upside the damn head.

Short ropes and tall trees for all of them.

xtop23's picture

Lack of quality collateral much, you bankster assholes?

Schmuck Raker's picture

Excellent link:

" times of extreme stress, gold acts like a universal liquidity stopgap – when all else fails, repo gold. The operational reality of a gold repo is a gold lease, charged at the forward rate (GOFO). In terms of market mechanics, a dramatic increase in gold leasing is seen as a massive increase in supply on the paper markets.

For various reasons in the past five years, collateral chains and the available collateral pool has dwindled dramatically. That has left banks to scramble for operational bypasses, but it also has led to periods of very acute stress.

When we match the price of gold against these stressed periods, they coincide perfectly. In other words, whenever collateralized lending has become problematic banks appeal to the universal collateral. Unfortunately, that looks like gold selling to the uninitiated."

Cacete de Ouro's picture

Last Wednesday the Wall Street Journal web site had reported on the Thursday bank CEOs meeting with Obama in the Whitehouse, but that article disappeared by Thursday morning mysteriously.

The meeting was 'closed press'


Looks like someome forgot to tell Reuters :)

Alpo for Granny's picture

Now this young man said..

"Indeed gold is the purest form of “money” available not contaminated by the current fiat paper system, a system increasingly corrupted by the manipulation of the high priests of paper money, otherwise known as “central bankers”.

Granny surely hopes he purchased the physical shiny (pure money) and not the banker shiny (contaminated paper money).

catacl1sm's picture

I wonder if this is a one off or a wind of change.

McMolotov's picture

Take me to the magic of the moment...

Herd Redirection Committee's picture

On a glory night

Where the children of tomorrow dream away


auric1234's picture

... in the wind of change!! The wind of change blows straight

into the face of time.


GVB's picture



Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts. 
–Trader Dan Norcini

disabledvet's picture

This COULD be true. And in fact "there might be real gold there" so if they get a margin call (JP Morgan itself?) then "that's some very valuable gold you're parting with" even though the "price" is falling.

NotApplicable's picture

And people like Trader Dan will either be Corzined for daring to collapse the system (ala Celente), or force majured for dollars if they do, as it's obvious they will do everything to protect the scam du jour.

Either way, you're not getting any gold nor breaking their game, as they are covered either way.

Smuckers's picture

Got the PVR all set for the CBC Gold show tonight, but knowing TPTB, it will record only white static.


widget's picture

They have the Blair Witch Project II technology.


TPTB arealso known to delete stuff remotely from TIVO etc.

jmcadg's picture

5% bullion not paper. Read it and weep Jamie.

McMolotov's picture

Someone on ZH posted a link the other day. I already reposted it once a few days ago, but I think it should be posted again:

I think something big happened, especially in light of the gold smackdown coming after the banks met with Obama.

Winston Churchill's picture

I'm thinking we will find out on Friday after closing.

Could be a PD, or big euro insurer blowing up.

McMolotov's picture

All I know is I'm not leaving much in the bank over the weekend.

Winston Churchill's picture

Me either ,just enough to clear payments already out.

JohnG's picture

Or was about to happen.  Read Jesse for a more thorough analysis.

UH-60 Driver's picture

Who has time for that?  Tonight is Amerika Idol! 

No Euros please we're British's picture

I'm waiting for the 2014 sequel, Amerika idle.

Mr Poopra's picture

The central planners, in their eagerness to defraud us, have created artifically low prices which in turn have created an artifically high demand, thus bringing the scheme to an even quicker and more violent conclusion.  There is no turning back now, we will soon have true price discovery for precious metals.  Thank you Blythe, JPM, and the rest of the conspirators for making me much, much wealthier.

GVB's picture

Thank YOU for pointing it out so well.

auric1234's picture

Well spoken brother.

To Ben and his gang: Thanks for the discount, IDIOTS


q99x2's picture

I'd dollar cost average into gold from here because things are getting kind of frosty. If a big false flag takes place nobody knows where the price is going to go. If the banksters know the collapse is immanent hard to say how they will strike. 

toys for tits's picture

Or buy phys now and some OTM paper puts.

NotApplicable's picture

If they collapse the price much further, you won't find as much as a flake of gold anywhere. You did see yesterday's US Mint Gold Eagle sales, right? Remember, that's the absolute worst place to buy from, due to their insane premiums.

Yet a record number thought it suddenly wasn't so insane after all.

Kaiser Sousa's picture

the sociopathic bankers r losing control...

though the focus is on Gold they r directing i believe all their fraudulent manipulative efforts on the only other form of real money ...Silver...the fact that it is now being discussed in enemy press is irrefutable evidence...

BUY PHYSICAL SILVER.... we r winning................

"The central banks of China and the emerging powers bought 535 tonnes last year to escape dollars and euros, the biggest wave of state purchases since 1964. Their strategy is to buy the dips, and they are no fools. The head of China's reserve manager "SAFE" used to run a US hedge fund.

They won't try to catch a "falling knife", prefering to wait until the dust settles. The upward trend of the great bull market has been broken. The technical damage is brutal. Bank of America expects a further drop to $1,200. Be patient.

My view is that the US Federal Reserve and the Bank of Japan "caused" the gold crash. The rest is noise. The Fed assault began in February when it published a paper warning that the longer quantitative easing continues, the harder it will be for the bank to extricate itself."

Arius's picture

"Bank of America expects a further drop to $1,200. Be patient."

Mr. Sousa - i like to believe you are correct in trusting BoA (Merrill guys) and surely everyone would like to buy it cheaper .... but No thanks ! 

the train might be leaving the station and they wil tell you be patient another one is coming... soon very soon ... just be patient!

btw, CITI also, expects 1200 level ... and you are hearing it a lot this 1200 number ... i think it is circulated around just to dumpen demand, but i dont think it will work ... people are no fools ... the guys who are buying now, are people who are either insiders and know the true story or people who have followed the markets and waiting for a decline ... either way the line be patient for the next train (where you can actually have a cabin to yourself) might not work this time.

also, the line with Cyprus as the cause of the decline was a poor one ... it could fool only people who have no knowledge or interest and therefore do not matter ...

Kaiser Sousa's picture

with respect i have to tell u that u've got it twisted...

the reference to BOFA is the for me, i dont care about the phony paper price of either Gold or Silver...i only care about how many ounces i have and thats more than a few but not enough for where this shithole of a banker controlled nation is headed.....

for clarification if u wish....u might find it enlightening and helpful...

Arius's picture

thanks for the clarification.  sorry for misunderstanding.

fijisailor's picture

"BUY PHYSICAL SILVER.... we r winning................"


Great idea.  Only trouble is I can't find any for sale except at ebay premiums.  My local dealer won't even take an order and I won't wire my money to an online dealer who has no inventory to deliver NOW.

NotApplicable's picture

Eventually, you're going to have to realize that ebay premiums represent the true price, rather than the scam of the spot price of paper promises. As I mentioned elsewhere, look at the premiums paid to the US Mint. Suddenly ebay doesn't look so bad after all.

NotApplicable's picture

The sociopaths never had control. All they have is the ability to destroy, stealing everything in the aftermath. To assume that a perceived loss of control is akin to losing, is to miss the big picture.

The key phrase to our future is "controlled collapse."

Kaiser Sousa's picture

"To assume that a perceived loss of control is akin to losing, is to miss the big picture."

c i dont get that at all...

if one understands that the goal of the bankers from the start is complete control of humanity thru perpetual debt servitude with debt based money as the mechanism, their losing is matter of fact not perception...and their desire to enslave humanity is THE BIG PICTURE...

a gift to you and others...

“The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin. Bankers own the Earth. Take it away from them but leave them the power to create money, and with a flick of a pen, they will create enough money to buy it back again. Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. But if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.”

—Sir Josiah Stamp, president of the Rothschild Bank of England and the second richest man in Britain in the 1920s, speaking at the University of Texas in 1927.

aka Gil's picture

Nice rational presentation, well done.