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"No Alternative" to Gold as Global "Tipping Point" Looms Amid Japanese Nuclear Crisis

Commodities / Gold and Silver 2011 Mar 17, 2011 - 09:14 AM GMT

By: Adrian_Ash


Best Financial Markets Analysis ArticleTHE PRICE OF GOLD prices stalled just above $1400 per ounce for the second day running on Thursday, as crude oil rose sharply amid the near-meltdown at Japan's Fukushima nuclear reactors.

Major-economy government bonds slipped back as Western stock markets rallied.

Japanese citizens reportedly joined the ex-pat exodus from Tokyo, 150 miles from the stricken plant.

"Water shot from trucks effective in cooling fuel pool as steam rose at Fukushima Daiichi No.1," said the Tepco energy company on its Twitter page earlier.

Airline tickets from Tokyo to Hong Kong, Singapore, Bangkok and Sydney have all more than doubled in price in the last week, with Bullet Trains to southern Japanese destinations now packed with young families according to press reports.

"The Japanese disasters are not happening in isolation," says bond-fund giant Pimco's CEO Mohamed El-Erian. "They add to the...uprisings in the Middle East and the related increase in oil prices.

"As such, the risk of a global macro tipping point cannot, and should not, be ignored."
"There's no other alternative really to gold," says MKS Finance's Bernard Sin in Geneva, adding that "the situation in the Middle East and North Africa is discouraging people to go short on gold."

At the start of the week, "You had a lot of people selling gold to cover losses in other markets," reckons Bart Melek, TD Securities' head of commodity strategy.

"We've seen this before, when people are in crisis mode and gold falls and then recovers."

Silver prices today turned lower at $34.65 per ounce, below Wednesday's peak 50 cents higher.

Despite fresh losses in Tokyo stocks, both European and US equity markets bounced sharply on Thursday, while the US Dollar also recovered.

The Euro had earlier risen back above $1.40 for the second time this month, while the Japanese Yen hit new all-time highs vs. the Dollar, taking out the 1995 high at ¥80 which followed the Kobe Earthquake.

Yen gold prices have fallen by 10% in the last week, but Tokyo premiums over benchmark London prices for wholesale gold bullion bars have risen by one half to $1.50 per ounce, says Reuters.

Forecasting joint intervention to depress the value of the Yen, "Disorderly price action has certainly taken place, driven by short-term speculative flows," says currency reasearch chief Derek Halpenny at the Bank of Tokyo-Mitsubishi UFJ.

Amongst $342 billion of overseas assets, repatriation by private Japanese savers would put at risk 3.7% and 11.2% respectively of Australia and New Zealand's bond markets, plus 3.1% and 7.3% of Hong Kong and Vietnam's stock markets according to a table from Citigroup analysts.

Both China and Germany said they're suspending all nuclear power development meantime, with the latter's EOn provider starting to close existing nuclear output on Thursday.

After the failed bond auctions by Russia and Poland on Wednesday, French publisher Lagardere delayed the flotation of its stake in Canal+ and Bloomberg said commodities giant Glencore and German holiday-firm Tui may also shelve initial public offerings.

Panic-buying of salt in Beijing meantime led China's National Development & Reform Commission to warn it would "resolutely crack down on illegal acts including spreading rumors to deceive the public" about the risk of radiation coming from Japan.

China's currency, the Yuan, will meantime be used to quote gold bullion prices at Hong Kong's century-old bullion exchange, the Chinese Gold & Silver Exchange Society, its president Haywood Cheung said today.

Cleared by Bank of China and Wing Hang Bank, the new Yuan-denominated gold offering could generate US$770 million in daily trades by this time in 2012, he believes.

"People could speculate on the Yuan through gold, which is globally recognized," Cheung is quoted by Bloomberg.

"We want to attract foreign investors who want to invest in the Chinese currency."

Vietnam's communist government, meantime, can only stop its citizens hoarding gold by boosting confidence in the Dong currency, bullion-market analysts at a conference this week.

A seminar held in Hanoir by the Vietnam Banking Association and Vietnam Bank for Industry and Trade heard calls for "a sensible approach to the regulation of the gold market" after the government froze new trading licenses.

"Vietnamese people are currently storing up around 500 tonnes of gold," said Tran Trong Khanh, general director of the Saigon Gold and Silver ACB-SJC Joint Stock Company.

"The State Bank of Vietnam (SBV) should organise training courses on gold trading and grant trading licenses."

By Adrian Ash

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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