Japanese consumers rush to buy gold as Abenomics money printing surges out of control

April 1, 2014

Precious metals retailer Tanaka Kikinzoku Jewelry has reported a five-fold surge in sales of gold bars this month, according to the Financial Times.

The FT reported: ‘At the company’s flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about $22,500. March has been the busiest month in Tanaka’s 120-year history.’

Inflation spikes

Japanese prime minister Shinzo Abe is suddenly facing a jump inflation without any increase in local salaries. Consumer spending slumped by 2.5 per cent last month. It was expected to rise ahead of Japan’s infamous sales tax hike in April which will drive up prices in a one-off spike in inflation.

Instead consumers are rushing to buy gold as a hedge against inflation, just as we have seen in China over the past year. This is entirely rational behavoir.

What is perhaps less easy to understand, on the other hand, is why the price of gold is going down. ETF sales of the yellow metal continue to weigh more on its price than physical demand from Asia which is clearly very strong, and central bank manipulation of the spot price still holds the market in its grip.

Half-kilo hedge

The Japanese are followers of fashion. How will the gold price look if 100 million people all want to own a half-kilo of gold as an inflation hedge? And how many more will follow them when they see the price going up?

Japanese consumers are taking the only rational approach to investing with runaway inflation and what else is the more certain impact of a higher sales tax?

Buying gold at current low prices in a country where money printing is running at three times the highest levels of QE3 is also a no-brainer. In yen terms at least, there is only one way for the price of gold to go!


Peter Cooper is the editor and publisher of the ArabianMoney investment newsletter and the popular financial comment website www.arabianmoney.net

Man has had the ability to separate silver from lead for as far back as 4000 B.C.