The turmoil is continuing on the stock markets and currencies and the uncertainty has impacted the yellow metal positively,for those who had bought it at much cheaper rates. Japanese households rushed in April to sell gold coins and jewellery to bullion dealers as retail prices hit a 27-year high in yen,signalling exports of the precious metal will continue as domestic sales remain soft. Japanese sold 2.5 times more gold than they bought in the first quarter of this year,according to bullion house Tokuriki Honten Co. But the sales spiked even more in April as the retail price rose above a near three-decade high of 3,660 yen per gram,which includes a 5 percent consumption tax,to three time more sold than bought,Tokuriki said. Japan's largest bullion house Tanaka Kikinzoku Kogyo said it has received 2.1 tonnes of gold in April and a trader at a foreign bank said gold purchases by his employer rose 30 percent in early April compared to the first quarter of the year. There are more potential sellers and I think there is a huge volume still hidden in drawers,said Fumio Yamamoto,a director at Tokuriki. There are cases where quite old gold has been brought to us. Households in Japan may hold 1,500 tonnes of gold,a legacy of buying during past financial turbulence and a preference over futures on the Tokyo Commodity exchange (TOCOM) or more widely used exchange-traded instruments in London or New York,according to bullion dealers. In an apparent sign that Japanese households now prefer cash over gold,widely used as a hedge against inflation or financial and political instability,physical bullion sales have helped make the country an exporter of gold since 2006. Japan imported 10.835 tonnes of gold in calendar 2009 and exported 71.868 tonnes,making it a net exporter of 61 tonnes,according to the Ministry of Finance. Gold priced in euro hit a record of 864.75 euros per ounce on Greece's debt plight in April,while dollar-denominated gold reached a record $1,226.10 an ounce in December. Spot gold currently trades around $1,140 an ounce. But retail gold in Japan peaked in January 1980 at 6,495 yen per gram when Iran's Islamic Revolution caused a global spike in prices - and hit a trough of 917 yen in 1999 a decade after an asset-price bubble burst sending the country into prolonged stagnant growth and deflation. The yen now trades around 90 to the dollar compared to 250 yen to the dollar in 1980,while the yen-denominated gold price is about half the level of the 1980 record. A Reuters poll showed dollar/yen at 100 yen in a year,a level it stood a year ago. Japanese gold holders would ideally like a weaker yen and higher global prices which would provide bigger returns. But with domestic retail gold high and the yen looking stable - households have decided en masse that it is a good time to sell. YEN RETAIL PRICES RULE Bullion dealers stress that while the global gold levels are important,the decision to buy or sell by Japanese households depends mainly on the yen retail price and domestic factors. Retail prices in yen touching a 27-year high mean those who held onto physical gold holdings can profit,so the situation is highly favourable for sellers,an official at Tanaka Kikinzoku,said. Another strategist agreed. The predominant trend is for those who bought at the highs in the past to book profits now based on the current yen retail price,said Koichiro Kamei,managing director at research firm Market Strategy Institute in Tokyo. The outstanding characteristic of the latest Japanese investor behaviour is that they are cashing in gold,which is markedly different from the behaviour outside Japan. For most Japanese,domestic events such as financial system instability in the early 2000s and the end to full state protection of bank deposits or concern about government debt levels now almost twice the size of the economy do not seem to weigh heavily enough to buy gold. A sense of crisis that may prompt a flight-to-quality buying of gold may not occur unless Japanese government bonds are sold on fears about Japan itself,said Yamamoto at Tokuriki.
