Canary In The Gold Mine: In Historic Move, Japanese Pension Fund Switches To Gold For First Time Ever

Tyler Durden's picture


As US weak hands keep piling out of gold whether to make space for the Facebook IPO tomorrow, or just to load up on paper currencies in advance of central banks printing much more, two things have happened: China is now on its way to becoming the biggest source of gold demand, surpassing India, but more importantly as of hours ago, in a truly historic move, "Okayama Metal & Machinery has become the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies." Not our words: the FT's.


Initially, the fund aims to keep about 1.5 per cent of its total assets of Y40bn ($500m) in bullion-backed exchange traded funds, according to chief investment officer Yoshisuke Kiguchi, who said he was diversifying into gold to “escape sovereign risk”.


The move into a non-yielding asset comes as funds in the world’s second-biggest pension market are under increasing pressure to meet promised payments, as domestic interest rates remain rooted near zero. This year, the first of Japan’s baby boomers turn 65, becoming eligible for payouts.


Mr Kiguchi said the lack of yield was a concern for the fund’s investment committee, but he persuaded them that “from a very long-term point of view, gold may be one of the safe currencies”. He added that he had sold Australian dollars this month to meet his initial target allocation for gold for the fund, which has 20,000 members.


Mizuho Trust & Banking, a unit of Mizuho Financial Group, has begun to offer investment schemes allowing smaller pension funds to invest in gold.


While few fund managers are counting on a crash in core assets such as Japanese government bonds, said Takahiro Morita, head of the Tokyo arm of the World Gold Council, a producers’ association, they were increasingly receptive to the idea that gold could act as a buffer against shocks. “Last year’s tsunami and the eurozone debt crisis shows that it was wise to expect the unexpected,” he said.

The first of many:

Historically, institutions in the $3.4tn Japanese pension market have clung to traditional assets. Bonds accounted for 59 per cent of industry assets in 2011, the highest share in the world, according to Towers Watson, a consultant. Just 6 per cent – the lowest share – was invested in alternatives such as property, private equity and hedge funds.


Nomura, Japan’s biggest wealth manager, added a gold option to its monthly survey of 1,000 randomly selected retail investors in February. Every month since, gold has been ranked the third-most desirable addition to portfolios, well ahead of competing assets such as investment trusts, bonds or foreign securities.

And the absolute punchline:

With institutions warming to gold, too, demand could grow further.  “If you look at assets over the past couple of decades, equity has been a loser, while fixed income offers tiny coupons,” said Yoshio Kuno, Japan head of Newedge, the futures broker. “Gold is becoming an acceptable currency substitute.”

So go ahead - dump all of your gold. The buyers are there.

In the meantime, more and more and more funds comprising the $3.4 trillion Japanese pension market will buy. And soon after, all the other pension funds, which just happen to amount to tens of trillions. Assume they allocate 5% of all assets to gold, or the market begins to discount this inevitability, and things start getting interesting.

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Wed, 05/16/2012 - 12:36 | 2431838 Squishi
Squishi's picture

old people don't have teeth anyway.

Wed, 05/16/2012 - 12:44 | 2431881 battle axe
battle axe's picture

Japanese might be smarter then we think.....

Wed, 05/16/2012 - 12:53 | 2431910 Money 4 Nothing
Money 4 Nothing's picture

I beg to differ.. Their soaking in it.

Wed, 05/16/2012 - 12:57 | 2431966 ihedgemyhedges
ihedgemyhedges's picture

"I'm sure those idiots will just sew little gold coins in to their kimonos."

Sincerely, Advisor to Charlie Munger

Wed, 05/16/2012 - 13:06 | 2431985 nope-1004
nope-1004's picture

Asshat Charlie Munger, lol.  Too old and too corrupt to see where true value lies when faced with currency wars and central bank devaluation.  Charlie Munger is one of those guys that can't change, won't change, too old to change, too corrupt to change, too embedded to change.  F' him. 


Wed, 05/16/2012 - 13:27 | 2432119 Bay of Pigs
Bay of Pigs's picture

His comments (as well as Gates and Buffets) were connected and coordinated with the MSM, FED, UST, COMEX and bullion banks to hammer the PM's. That is without question. The wailing and shrieking is as loud asd I've ever heard in 12 years of following this sector.

What is also clear is that $1895 and $48.70 (London fixes) will not be the highs for gold and silver.

Saddle up bitchez...bigger players are moving in. Don't pay attention to that lying POS Munger. 

Wed, 05/16/2012 - 13:31 | 2432146 markmotive
markmotive's picture

One pension fund in one country does not make a trend...but here's hoping it does! It's happening one-by-one...central banks, pension funds, institutional investors...

Bill Fleckenstein (of Greenspan's bubbles fame) on Gold:

Wed, 05/16/2012 - 13:34 | 2432165 strannick
strannick's picture

Now they just need to dump paper gold etfs for golden gold 

Wed, 05/16/2012 - 15:21 | 2432211 He_Who Carried ...
He_Who Carried The Sun's picture

Well, let's see whether this canary

lives or suffocates. They're already

raking in nice losses.

A pension fund that does not trust

Japanese companies' earnings and

dividends is acting rather foolhardy

from a risk-control point of view and

dismisses the future competitiveness

of Japanese industry, which is rather funny.


Wed, 05/16/2012 - 13:38 | 2432172 Bay of Pigs
Bay of Pigs's picture

Trend? LOL. You mean the 12 year Golden Bull market?

BTW, Fleckenstein a long term bull on gold.

Wed, 05/16/2012 - 13:47 | 2432216 He_Who Carried ...
He_Who Carried The Sun's picture

Every trend cometh to an end...

Wed, 05/16/2012 - 14:09 | 2432340 Bay of Pigs
Bay of Pigs's picture

Yes, and the case for gold and silver is stronger now than ever before. You calling the top?

Wed, 05/16/2012 - 15:22 | 2432705 He_Who Carried ...
He_Who Carried The Sun's picture

I am rather "topless",

as you may have noticed...

I left 'calling the top' to others

and I see no floor other than in the lower

14hundreds right now...


Wed, 05/16/2012 - 13:31 | 2432151 TheFourthStooge-ing
TheFourthStooge-ing's picture

Charlie Munger, also known as Grandpa Sleestak Magoo.


Wed, 05/16/2012 - 13:06 | 2431986 Xkwisetly Paneful
Xkwisetly Paneful's picture

Who bought Rockefeller Center and Pebble Beach at the tippy,tippy top?

 Assume this, assume that-no relative win, none at all.

Great material! Weak hands of the US to the strong hands of the IMF and the Japanese pensions.

OMFG too hysterical!


Wed, 05/16/2012 - 13:44 | 2432189 resurger
resurger's picture


You are so Anti-Semitic



Wed, 05/16/2012 - 13:56 | 2432272 Money 4 Nothing
Money 4 Nothing's picture

No, I am.

Wed, 05/16/2012 - 14:12 | 2432374 JackT
JackT's picture

Damn, if I could give you more up arrows I would at least give you 10.  Thanks for the reminder and the laugh!

Wed, 05/16/2012 - 12:55 | 2431944 Oh regional Indian
Oh regional Indian's picture

You don't need a weatherman to know which way the radioactive wind blows, I guess. 

But, just like CALPERs and Texas Ranchers.... these massive funds don't make independent decisions like this.

Nor do they necessarily make them for the good of it's retirees. Multi-billion anything anywyere is under orders, plain and simple. 

Just look at how much college endowments poured into REITS over the past decade. They number might shock you. Right through 2006-7-8, the debacle, they're still in REITS and doing rather well, against all odds.

Such things are nto smart investment decisions, those are orders.

Especially in Japan. The signal generally into large institution moving to gold is clear. 

What it portends might be an un-known.



Wed, 05/16/2012 - 17:27 | 2433123 Hook Line and S...
Hook Line and Sphincter's picture

Okayama M&M's is indeed a pioneer. Orders or not. They will find arrows in their back like all intrepid foragers of monetary safety. To underestimate the virility of the PTB's iron cock of war machinery is asking for another tsunami! Best keep their fiat and practice origamy with it. We have an infinitely long long way to go before paper-gold takes it's first hatha yoga class. That is..unless..someone revives the pan asian exchange.


wake me when I get my RFID injected

Wed, 05/16/2012 - 12:44 | 2431882 NotApplicable
NotApplicable's picture

It's paper gold. They can gum it.

Wed, 05/16/2012 - 13:08 | 2432018 Sancho Ponzi
Sancho Ponzi's picture

OT, From Rolling Stone: Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'

Wed, 05/16/2012 - 14:04 | 2432310 NotApplicable
NotApplicable's picture

Oh, this is awesome! By their own scumbag lawyer even!

Karma, bitchez!

Wed, 05/16/2012 - 13:27 | 2432122 HarryM
HarryM's picture

Hey - ya gotta start somewhere

Wed, 05/16/2012 - 13:01 | 2431925 SMG
SMG's picture

You know the only thing that bothers me about gold is supposedly there are tremendous amounts being kept off the market, hidden in private vaults and in untapped gold mines.  If that is true the Oligarchs who control such resources could just "print" gold from these hidden resources.  We'd eventually have the same thing we have now all over again, and the useless eaters would lose again.

I think silver would be a much better PM to buy.

Wed, 05/16/2012 - 13:06 | 2432001 lemonobrien
lemonobrien's picture

i have a gold coins sewed into my jeans.

Wed, 05/16/2012 - 12:52 | 2431940 TeMpTeK
TeMpTeK's picture

Just learned to sew....

Wed, 05/16/2012 - 12:59 | 2431963 vast-dom
vast-dom's picture

gold to 2k/oz, gold fronts, or lack thereof, notwithstanding.

Wed, 05/16/2012 - 13:55 | 2432267 Rich Bagg
Rich Bagg's picture

Goldbugs getting cornholed.  Without QE3 to bail their stupid asses out, expect more pain ahead.



Wed, 05/16/2012 - 14:10 | 2432330 NotApplicable
NotApplicable's picture


"Goldbugs" are backing up the truck, duh. Don't you even understand your own insults?

The only ones getting corn-holed are the weak hands who are forced to liquidate (mostly though, those aren't goldbugs, but speculators).

Wed, 05/16/2012 - 18:10 | 2433041 cranky-old-geezer
cranky-old-geezer's picture



If no QE3, you shouldn't be concerned about a few gold bugs here and there, you really should be concerned about all the big Wall Street banks collapsing and bankrupting they would have if TARP, QE1, QE2, and god knows what other backdoor bailouts hadn't happened.

You criticize a few gold bugs for losing 10%?

TBTF banks lost 100%, hell, 150%.  They lost all their money and all their depositors' money too.

No, we don't need QE3 to kick gold back up thank you.  We're not concerned about a 10% loss. 

Besides, we'd have lots of fun watching a few Wall Street zombie banks go down ...finally.

Wed, 05/16/2012 - 17:18 | 2433105 TheFourthStooge-ing
TheFourthStooge-ing's picture

Rich Bagg managed to grunt out the following:

Goldbugs getting cornholed.

Made me laugh©.

You're cornholing yourself with your own head. That's why you have such a limited view.

Without QE3 to bail their stupid asses out, expect more pain ahead.

Pull your head out of your ass and things won't look so shitty.


Wed, 05/16/2012 - 14:15 | 2432383 bernorange
bernorange's picture

You can make teeth out of gold.  Seems like a sound investment.

Wed, 05/16/2012 - 16:00 | 2432854 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

how about.......a gold cornhole plug

you'll find it in SkyMall (silver is also an option and offers some antibacterial benefits)


Wed, 05/16/2012 - 14:53 | 2432569 oldman
oldman's picture


AMEN, brother                        

and with all those boomers to chew an oldman's food---who needs teeth?

Thanks-----light enough for me                             om

Wed, 05/16/2012 - 18:47 | 2433328 Freddie
Freddie's picture

Well I like the ZH/Tyler(s) T-shirt banner ads with girls in tight T-shirts and panties.  It sure beats the O and Mochelle banner ads for 4 more years of misery.  Thanks Tyler's.

Wed, 05/16/2012 - 12:36 | 2431840 Lost Wages
Lost Wages's picture

Japanese Pension Fund.


What other buyers of size shall join in the 3rd stage of the bull market?

Wed, 05/16/2012 - 12:40 | 2431861 Quintus
Wed, 05/16/2012 - 13:10 | 2432025 mrgneiss
mrgneiss's picture

You have to wonder about a company that goes out of their way to talk down demand drivers for their products, Perth Mint and their spokesperson Bron Sucheki, who seems to spend as much time on company business as he does trolling the internet for possible bullish rumors for gold and silver he can attempt to dispel.  Jon Nadler's smarter cousin?

Wed, 05/16/2012 - 13:17 | 2432056 Quintus
Quintus's picture

Generally I would agree with you but in this instance he is correct.

Wed, 05/16/2012 - 14:10 | 2432362 NotApplicable
NotApplicable's picture

Perth Mint is a government operation. Mystery solved.

Thu, 05/17/2012 - 07:49 | 2434589 mrgneiss
mrgneiss's picture

The simplest explanation.................

Wed, 05/16/2012 - 12:45 | 2431892 ReallySparky
ReallySparky's picture

Soros jumped in Q1 too.

Wed, 05/16/2012 - 12:51 | 2431916 Zero Govt
Zero Govt's picture

you mean the Big Boys bought some shares they can rent them to the sharks, sorry shorts, to trash the Gold price even further

Soros buying anything is NOT a recommendation or indication of a bottom but more of the games they play in the rigged metals market

Wed, 05/16/2012 - 12:39 | 2431844 Cognitive Dissonance
Cognitive Dissonance's picture

I sense a change in the Matrix.

The barbarous relic suddenly seems a lot less barbarous. I wonder why?

Wed, 05/16/2012 - 12:48 | 2431904 NemoDeNovo
NemoDeNovo's picture

A "Change" yes there is a BIG Change on the horizon, the question is exactly how is it gonna go though?  I have been pondering this for quite some time -- How Bad and just how Long is this Change/transition going to be?  I don't like to deal in hope so my pragmatic side says , this ain't gonna be easy and or quick, but I do feel there is Light on the other side for those who are prepared/ready to jump this fence in to the next economy.


Just my 2c



Wed, 05/16/2012 - 12:55 | 2431953 Cognitive Dissonance
Cognitive Dissonance's picture

Chance (and luck) favors the prepared.

Wed, 05/16/2012 - 13:19 | 2432061 disabledvet
disabledvet's picture

Gold mining stocks have been flat to down in a market that has doubled. "Now you have to produce as prices are falling"? Doesn't sound bullish for price to me. I did take note John Deere was up big today.

Wed, 05/16/2012 - 18:49 | 2433337 Freddie
Freddie's picture

Someone hand Charlie Munger his ****ing gold slippers.

Wed, 05/16/2012 - 12:39 | 2431845 holdbuysell
holdbuysell's picture

Those Japanese are such uncivilized barbarians. (sarc)


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