Buying Gold in YEN Now Making Sense
As bad as things are here in the U.S., despite a current rising stock market, Japan has some serious issues to deal with as their economy spirals down the path of self destruction, bringing down with it the YEN.
December 12th, 2009, I mentioned that the YEN was not immune to problems. I said in that article, “The logical conclusion and another area to keep an eye on is trading gold in YEN.”
In Japan, GDP real growth has turned negative, incomes are shrinking, unemployment is rising, expenditures are more than revenues, public debt is almost 200% of GDP, exports are decreasing and the government keeps stimulating.
Is the Japanese Economy Worse Off Than the U.S.?
While Japan’s GDP (Purchasing Power Parity) is presently 4.14 trillion, its Stock of Domestic Credit ballooned to 12.34 trillion in 2008, three times its production. The U.S., comparatively speaking has about close to a 1:1 ratio.
Here are the economic data comparing Japan’s economy with that of the U.S. (Japan data listed first).
-5.7% (2009 est.) U.S. -2.4% (2009 est.)
-0.7% (2008 est.) U.S.0.4% (2008 est.)
2.3% (2007 est.) U.S. 2.1% (2007 est.)
$32,600 (2009 est.) U.S. $46,400 (2009 est.)
$34,500 (2008 est.) U.S. $48,100 (2008 est.)
$34,700 (2007 est.) U.S. $48,300 (2007 est.)
note: data are in 2009 US dollars
5.6% (2009 est.) U.S. 9.4% (2009 est.)
4% (2008 est.) U.S. 5.8% (2008 est.)
revenues: $1.614 trillion U.S. $1.914 trillion
expenditures: $1.997 trillion (2009 est.) U.S. $3.615 trillion (2009 est.)
192.1% of GDP (2009 est.) U.S. 82.9%
$516.3 billion (2009 est.) U.S. $994.7 billion (2009 est.)
$746.5 billion (2008 est.) U.S. $1.277 trillion (2008 est.)
$2.132 trillion (30 June 2009) U.S. over $15 trillion (30 June 2009)
$2.231 trillion (31 December 2008) U.S. $13.75 trillion (31 December 2008)
All Is Not Well In Japan
Things don’t look well for Japan’s future either. Government debt is expected to grow to 246% of GDP in just 3 years. Imagine what these numbers would look like if inflation struck Japan and oil prices started to climb.
Remember, Japan’s livelihood as the world’s 5th largest user of oil depends on massive imports from oil producing nations to keep their economy running smoothly. Any change in this dynamic could have extreme consequences.
To make matters worse, Japan’s citizens age 60 and over make up 30% of the population and that number is expected to grow to 40% by 2050. All the while, Japan’s work force will be shrinking.
So what reason do you give for the strength of the YEN the past 2 1/2 years?
Yen (JPY) per US dollar
93.4 (March 31, 2010)
94.5 (2009)
103.58 (2008)
117.99 (2007)
116.18 (2006)
110.22 (2005)
I asked the same question concerning the strength of the EURO in November of 2009 and recommended people invest in gold with EUROs. That trade returned over 7% in two months. While that is still a good trade, despite the proposed intervention in Greece that has seen the EURO rebound some, the YEN trade is looking pretty attractive at present.
This Joy Ride the YEN Has Experienced Is Coming To an End
The last 5 years has seen the YEN and the U.S. Dollar price of gold switch back and forth, one leading the other, while both depreciating in value versus gold. For the past couple years it’s been the U.S. Dollar price of gold leading the YEN price of gold higher as shown in the following chart.
But in March of 2010, that dynamic changed when gold priced in YEN broke out above gold priced in U.S. Dollars as you can see by blue line, crossing the red line in the chart below. In fact, YEN gold has returned 5.18% the last 60 days while U.S. Dollar gold 2.67%
.
While the U.S. has it’s problems with debt, being a net exporter, high unemployment and the like, Japan, with its ever decreasing population and increasing older population is in deep trouble.
Their government solution has been adding more debt to debt to try and stimulate the economy. The same goes for the Eurozone and the U.S. leaders. This is a recipe for disaster no matter what currency one is invested in, but while the U.S. Dollar is in the muddle through stage, profit can be had investing in gold with the EURO and the YEN.
2 comments
 |
 |
 |
 |
 |
Subscribe to Blog Articles
4 Ways Gold Dealers Rip You Off!
Another gold bug trying to get the average Joe to risk his savings in an asset that will be back down to $300 in a few years. Gold has NO intrinsic value. Period. If you want to get in on the bull market you are a few years late. I was in gold in 2001 at under $300. I sold mine recently. The higher the price goes the higher risk.
JB, Interesting you make such a comment about me being a “gold bug.”
Perhaps you haven't read any of the articles I've written on gold you would come to the conclusion I'm a realist. Gold should be part of everyone's portfolio as insurance against a falling dollar. Period.
First of all, this entire article was centered around buying gold in YEN, not U.S. dollars.
Second, as far as your comment that gold has “no intrinsic value,” you'll be surprised to know I agree with you. Gold is just a shiny rock. It's what it is priced in that matters. You bury gold in your back yard 10 years ago, and dig it up today, clean it off, it's still a shiny rock. But why is that shiny rock worth more today in U.S. Dollar terms that it was 10 years ago? It has nothing to do with intrinsic value. It has everything to do with what that shiny rock can buy you in terms of purchasing power. The shiny rock can buy you more goods today than it could 10 years ago. Period.
Third, as far as risk goes, the risk is in the U.S. Dollar, EURO and YEN that I have written article after article about. The EURO trade in gold is up over 7% since I first recommended it in December. The YEN trade in gold is just getting started. The U.S. Dollar trade in gold is taking a breather before it moves higher. But you sold yours.
When gold breaks out to a new high as the Dollar Index falls below it's March 2008 lows, will you buy gold at a higher price? Probably not, because you consider it a “high risk?” Gold isn't the risk. It's what it is priced in that is. That's what you're missing in your understanding.