Hi there Dazed I agree that the PoG response to the BoJ...

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timber1956

7,423 Posts.

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02/11/14

00:02

Post #: 14222748
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Originally posted by Dazedandconfused ↑

Personally, I have been puzzlingly over this for the last 2 days and I still can not make sense of it.

Japan was already printing money, this last announcement means they will be printing about 20% more. The new total of Japanese QE is about $US750 billion which is roughly the same number the Fed was doing at the peak of their QE [80 billion/month]. The Japanese pension fund is going to unload Govt bonds [which apparently will all be bought by the BoJ] and will use the cash to buy stocks. ..... OK? so far so good ... easy to see why the Nikkei heads north [and to some extent the DOW et al]

But I start to lose it from here on.....

A weaker yen is bad for the $US .... Japan is exporting deflation to the US
A weaker Yen is bad for China .... China is already angry with Japan for their policy of driving the Yen down.
The current level of the Yen is driving many Japanese businesses to the wall as it is ... energy input costs etc. ....

Gold goes down (?) in leaps and bounds on the back of this announcement?? [when I was offered the choice between the RED pill and the BLUE pill nobody told me about the PURPLE pill which clearly was the right one to take.]

I don't get it. The BoJ will now be effectively monetizing all Japanese government debt. Everything goes onto the tab. Credit with absolutely no collateral ..... and gold goes down???

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Hi there Dazed

I agree that the PoG response to the BoJ announcement wasn't logical.

My assessment is that the PoG should not have responded at all. QE is not inflationary, and it has limited stimulus value. It is an economic lever of questionable value, except for bolstering commercial bank reserve deposits.

So why a sell off?

I think the blame falls on nervous Comex traders. They are long gold futures and very unhappy. At the moment if someone said "BOO" very loudly their first instinct would be to sell. If it hadn't been the BoJ, any other surprise news would have provoked the same reaction.
2 Upvote

0 Great analysis

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