Caesar Bryan continues:

“As you know, the background in Japan is one of constant deflation caused by a strong yen and a weak economy.  The Bank of Japan has obviously taken some steps in an attempt to alleviate the situation.  Interest rates are at zero, but they know they need to be more aggressive. 

They also have an asset purchase program of roughly 91 trillion yen....

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“However, recently they have been coming under increasing political pressure from the opposition party.  Now there is an election being called for in the lower house for December 16th.  It looks like the opposition leader, Abe, will be the next Prime Minister.

He’s been very outspoken, asking for the BOJ to be much more aggressive in lowering the value of the yen.  He suggested they should buy construction bonds directly from the government.  This crosses the boundary of deficit financing.  The Bank of Japan has been pushing back, and the head of the BOJ has been stressing the independence of the Bank of Japan. 

But it seems to me that the Japanese are close to some sort of agreement on weakening the yen.  This will spur demand for gold from the Japanese public.  Up to now the Japanese have been relatively quiet when it comes to gold, but I think things are stirring.  If you look at the gold price in yen, it’s right back to the highs from February.  So gold has had a good run as the yen has weakened.

Japan has a huge Debt/GDP ratio of well over 200%.  So we may be in for one of those changes in Japan where the yen weakens, the stock market rises, and the bond market is weak.  But this is an important positive for the gold market because we will finally see the Japanese entering the gold market in size.

Coming closer to home, the Federal Reserve has begun to expand its balance sheet.  Over the last six months there had been no change in their balance sheet.  However, very recently we have seen the Fed’s balance sheet begin to expand. 

This is also positive for gold, but we have not seen the recent 2.5% increase in the Fed’s balance sheet reflected in the gold market just yet.  So any weakness in gold should be used to add to positions.  I forgot to mention that the Brazilians added 17 tons to their gold position, bringing their total position to 52 tons.  This helped the gold price in October.”

Bryan also added: “In terms of the gold equities, they have given up some ground relative to bullion.  I hope the low has now been put in on a relative basis to bullion, back in July, and we will now be heading higher.  There is every reason to believe that in a higher gold price environment the equities should perform extremely well.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with James Turk, Egon von Greyerz, Michael Pento, Wilbur Ross, Don Coxe (BMO $538 billion) and Ben Davies are available now.  Also, be sure to listen to other recent KWN interviews which included Art Cashin (UBS $612 billion), Nigel Farage, Bill Fleckenstein, and Rob Arnott (RALLC $100 billion) by CLICKING HERE.

Eric King

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