gold - the "japan factor"

  1. 9,081 Posts.
    This extract from Daan Joubert's article at the Gold Eagle site (16.6.03) makes some interesting observations on a possible catalyst that could really kick gold along:

    " .... Japan has been more than just toying with deflation over the past decade or so. In desperation at its lack of success to put new life into the economy, the government is now considering a tax on cash and time deposits to prompt Japanese households into spending some of their $12 trillion of savings. The contemplated tax is said to be in the 3-5% range, compared to the less than 1% interest currently being earned.

    If it becomes fact, this tax will probably kick in with their new financial year, in April 2004. At the same time, new anti-counterfeit notes could come into circulation. Hoarders of cash will face the prospect of paying a tax to exchange their old notes for the new ones or lose the full value of their mattress money.

    The belief is that money will now flow into the stock exchange and into the purchase of property; perhaps also into the purchase of consumer goods. However, it is practically certain that - given Japanese culture and tradition - some of the savings and cash will be used to stock up on gold in order to avoid paying the tax. The total amount of gold ever mined, say 140 000 tons, at $350/oz is worth about $1,6 trillion. If only 0,1% of Japanese savings of $12 trillion were to flow into gold, the $12 billion would purchase 1060 tons at $350/oz - much more than what India imports in a year and almost half of annual mine production.

    Given the tight gold market of today, that could send the price into uncharted territory. And the more it climbs, the more the Japanese will switch endangered savings into gold. While the tax is still being debated and with 10 months to go before it could take effect, matters are still fluid - but do not be surprised if prudent Japanese begin to buy gold in real quantity during the next few months."
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