Today 25-year veteran Caesar Bryan told King World News that the Japanese are getting ready to enter the gold market in size. Here is what Bryan, from Gabelli & Company, had to say about this fascinating situation: “Last time we spoke we talked a little bit about what was going on in Japan. Two days ago a former advisor to the LDP, Abe, came out with some advice that the Bank of Japan should add another $60 trillion yen, which is about $750 billion, to the monetary base.”
Caesar Bryan continues:
“He then said this would cause the yen to fall to 100 yen to the dollar, from its current value of 82. This in turn would raise the CPI inflation rate to Abe’s target zone of 2% to 3%. So this was more talk about what Abe would do should he become Prime Minister following the election in Japan on December 16th.
Now if the yen falls back to 100, we believe that would be very positive for the Japanese equity market....
“But certainly taking the yen back to where it was in 2009 would not only be very good for the equity market, but also extremely positive for the gold market.
The bottom line is that a weakening yen will encourage Japanese investors to buy gold. So we can expect more monetary easing in Japan and that’s the continuing investment theme as we look into 2013.
Coming back to the United States, all of this deficit and fiscal cliff talk, the obvious conclusion is that it’s going to be really hard to cut spending. The US will also have a difficult time raising revenues so it will have to continue with an extraordinarily loose monetary policy. The path of least resistance is for continued Fed easing.
Moving on to Europe, there is a quasi-religious fervor or belief behind this euro project. There again, they sort of patched up the Greek situation with a scheme for them to buy back their bonds at 28% of par, and for the rest of the eurozone to finance that.
But meanwhile, the underlying competitive issue remains. The Greek economy is not competitive so there is going to have to be an internal devaluation. Workers in Greece are going to have to be prepared to make less money in order to be competitive with the rest of Europe. This is going to be a hard reality for the Greeks, and to a lessor extent in Spain as well.”
Bryan also added: “As I mentioned previously, we are going to see continued high deficits here in the United States, financed by the central bank. This is going to be incredibly constructive for the gold market and other hard assets.
There has been some volatility in the gold market, and I think that is its job, to frustrate buyers and holders. But there is absolutely no question in my mind that it is going to be heading higher. We sort of had that break in October, but I should point out that gold will divorce itself from the dollar index at some point.