Yen Carry Traders Are Stimulating An Investment Demand For Gold
Sunday, 20. July 2008, 04:41:49
Yen carry traders are now underwriting the investment demand for gold.
The yen carry trade, whose barometer is EUR/JPY, FXE:FXY, has been the great unseen hand moving stock and commodity investing; its use, has traditionally generated tremendous flows in, and now out of the BRICS, EEB, which has been highly lucrative to investors providing much greater returns than the cost of their 0.5% loans, as can be seen in the 2 year Yahoo finance chart of EEB.
Disinvestment from stocks, and thus an unwinding of the yen carry trade began May 19, 2008 with the failure of the TAF, TSLF, and PDCF rally as seen here in the 3 month Yahoo Finance chart of the BRICS relativ to gold.
The MSN Finance chart of the BRICS, EEB, relative to gold, GLD, oil, USO, and Cabot Oil and Gas, COG, for the period May 1, 2008 to July 18, 2008, presented here, shows that between June 6 and June 23, there was an winding of traditional yen carry trades, and a use of the loan facility to go long oil, the US based natural gas and oil producers, and gold.
The chart of the gold ETF, GLD, shows the yen carry trade investors underwriting the investment demand for gold.
Said another way, a rising yen, FXY, since June 23, 2008 when yen carry traders disinvested from stocks world wide due to risk aversion to inflation, level two assets and level three assets at banks, as well as the loss of confidence in the US Dollar, seen in the fall of USD/JPY, as investment risk of the failure of Freddie and Fannie is transferred to the Federal Reserve by loans from Bernanke, is stimulating an investment demand for gold.
Summary
The yen carry trade is the mother of all stimulus ... and it is now stimulating the investment demand for gold.
Attitional Comments
I envision the USD/JPY to continue to fall in value.
It could be that the Yen, FXY, and the Euro, FXE, may not continually rise higher as the dollar falls: it could be that all currencies may fall lower in death spiral together.
The yen carry trade, whose barometer is EUR/JPY, FXE:FXY, has been the great unseen hand moving stock and commodity investing; its use, has traditionally generated tremendous flows in, and now out of the BRICS, EEB, which has been highly lucrative to investors providing much greater returns than the cost of their 0.5% loans, as can be seen in the 2 year Yahoo finance chart of EEB.
Disinvestment from stocks, and thus an unwinding of the yen carry trade began May 19, 2008 with the failure of the TAF, TSLF, and PDCF rally as seen here in the 3 month Yahoo Finance chart of the BRICS relativ to gold.
The MSN Finance chart of the BRICS, EEB, relative to gold, GLD, oil, USO, and Cabot Oil and Gas, COG, for the period May 1, 2008 to July 18, 2008, presented here, shows that between June 6 and June 23, there was an winding of traditional yen carry trades, and a use of the loan facility to go long oil, the US based natural gas and oil producers, and gold.
The chart of the gold ETF, GLD, shows the yen carry trade investors underwriting the investment demand for gold.
Said another way, a rising yen, FXY, since June 23, 2008 when yen carry traders disinvested from stocks world wide due to risk aversion to inflation, level two assets and level three assets at banks, as well as the loss of confidence in the US Dollar, seen in the fall of USD/JPY, as investment risk of the failure of Freddie and Fannie is transferred to the Federal Reserve by loans from Bernanke, is stimulating an investment demand for gold.
Summary
The yen carry trade is the mother of all stimulus ... and it is now stimulating the investment demand for gold.
Attitional Comments
I envision the USD/JPY to continue to fall in value.
It could be that the Yen, FXY, and the Euro, FXE, may not continually rise higher as the dollar falls: it could be that all currencies may fall lower in death spiral together.
