Top Fiat Money Vs. Gold: What Shines Brighter in 2016?

Aibek Burabayev - INO.com Contributor - Metals


It becomes a tradition to post a performance review of the top currencies vs. gold at the beginning of the new year.

Fiat money is represented by 7 currencies: The US dollar (USD) and 6 components of the US dollar index (DXY) placed by weight: euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona (SEK) and the Swiss franc (CHF).

Chart 1. Year-To-Date Dynamics Of Top 7 Currencies Versus Gold: No Comment

Chart 1. Year-To-Date Dynamics Of Top 7 Currencies Versus Gold
Diagram by Aibek Burabayev; Source: tradingview.com

The Euronews agency has a special rubric called “No comment” where they show video news without commentary as the picture speaks for itself when something dramatic, awful or really amazing is shown. I think the above diagram also speaks for itself and it shows the drama where the gold just smashed all of the fiat currencies as none of them could escape. None! Continue reading "Top Fiat Money Vs. Gold: What Shines Brighter in 2016?"

BoJ Ready for Helicopter Money?

Lior Alkalay - INO.com Contributor - Forex


Helicopter money, that’s the big talk in the past week. The term helicopter money refers to a case where the government hands out money to citizens and funds it through printed money. The last time helicopter money was relevant was back in 2009. That’s when Ben Bernanke, then Federal Reserve Chairman, literally opened up the printing press and poured massive amounts of liquidity into the bond market, in tandem with a massive fiscal stimulus plan from the US government. Now, investors are speculating that the BoJ is ready to unleash a similar move, in coordination with the Abe government. And with the BoJ monetary policy meeting scheduled for this Friday, investors have high hopes. Are these hopes in place?

Kuroda Vs. Abe

In the past several months, BoJ watchers have been routinely underwhelmed by the BoJ’s statements. The BoJ slashed deposit rates to -0.5% and increased its QE program to a whopping ¥80 Trillion. But since those two announcements deflation has returned, yields on Japanese Government Bonds plunged to record lows and Japan’s GDP growth marked a modest 0.1% annually. And still, no monetary bazookas have been announced. Continue reading "BoJ Ready for Helicopter Money?"

Japanese Yen Faces Summer Sale

Lior Alkalay - INO.com Contributor - Forex


The Yen is vulnerable. Yields on Japanese 2-year sovereign bonds are as low as -0.26%, inflation is persistently low (and seems likely to stay that way for a while) and GDP tilts from contraction to expansion and, in aggregate, barely grows. Currencies such as the US Dollar, the Pound Sterling, and even the Mexican Peso provide plenty of reasons to buy them over the Yen, and yet, the Japanese Yen holds sway. The reason? Global Stocks are underperforming.

Japanese corporations are basically cash machines, hoarding vast amounts of cash that they need to invest. The problem is that Japanese corporations’ default choice has always been buying the highly liquid Japanese sovereign bonds, despite their ridiculously low yields. If market sentiment is upbeat, if stocks perform well, and the global economy seems stable, Japanese corporations are willing to take the risk and store their cash in foreign assets, thus pushing the Yen lower. Continue reading "Japanese Yen Faces Summer Sale"

The Japanese Gold Trapped In A Large Consolidation

Aibek Burabayev - INO.com Contributor - Metals


This topic was promised in one of my previous posts to our readers, and I am pleased to offer it to you today. I was waiting to see the end of the month price action to try to write when I considered all the moves within a month for more accuracy. Carol and Diane, I should admit you are very brave ladies as when I opened GYEN (The AdvisorShares Gartman Gold/Yen ETF (NYSE Arca: GYEN)) chart I was shocked by all the crazy and abrupt moves there. The history of this ETF is quite short (from 2014), and the analysis based on it would not be solid. At the end of the post, I've added the GYEN chart for you to judge for yourself. I picked the gold/JPY chart instead for analysis as the ETF tracks the price of this pair. I hope you will enjoy the post.

Chart 1. Gold/JPY Monthly: Multi-Decade Uptrend Is Intact

Monthly Chart of GLD/JPY
Chart courtesy of tradingview.com

The multi-decade uptrend highlighted in the chart reflects the trends of both the gold/$ and $/JPY markets. Those markets were extremely bullish for the past decade, and the gold/JPY strong upside move shows the synergy of them. The Big Bull Run here stalled in 2013 while gold/$ stalled two years earlier in 2011. The reason is that the $/JPY bullish move stopped last year and helped to extend the upside move in gold/JPY and then to soften the downside pressure from the falling gold/$. Continue reading "The Japanese Gold Trapped In A Large Consolidation"

What's Really Happening With The Japanese Yen?

Lior Alkalay - INO.com Contributor - Forex


The Japanese Yen is making headlines, again. The Dollar-Yen trade pierced through the 110 support level and the Bank of Japan's credibility is at stake. It's only a matter of time before the BoJ swings its "sword" and slice rates again, or at least, so it seems. But while Yen strength has caused quite a stir in Japan, its origins, this time around, are rooted elsewhere.

Wall Street is flat, European bourses are falling and China isn’t out of the woods just yet. Japanese corporates keep hoarding cash and, of course, they need to park it somewhere. That “somewhere” is their default choice; i.e. repatriate the cash and buy into the safety of Japanese Government Bonds.

Chart of the Japanese Yen
Chart courtesy of Bloomberg Press

As illustrated in the chart, when comparing the Bloomberg Japan Sovereign Bond Index with S&P500 and Nikkei 225, demand for Japanese Government Bonds has been strong. Japanese Government Bonds beat both the S&P500 and the Nikkei 225 for the passing year. And that’s even more interesting when you consider the negative yields—it actually costs to hold Japanese Government Bonds.

How long can Japanese corporates keep repatriating funds and pay for the "privilege" to hold Japanese Government Bonds? Continue reading "What's Really Happening With The Japanese Yen?"