Japan Still Selling, Not Buying Gold

HOUSEHOLDS in Japan, the world's third largest economy, continued to sell rather than Buy Gold in 2012, according to results from the country's biggest bullion retailer.

Tanaka Kikinzoku Kogyo, founded in 1885 and part of the Tanaka Holdings Group, says that its purchases of gold bullion from the public outweighed its sales for the eighth year running in 2012.

The news contradicts many late-2012 claims that Japanese gold demand was surging as a result of weak monetary policy. This week's new 30-year highs in the Yen gold price has also seen more selling than buying, according to Japanese retailers.

"We initially expect a lot more selling back of gold, including used jewelry, before we see new buying," said Tanaka Jewelry's marketing manager Naoto Mizuki to the Wall Street Journal, commenting earlier this week on the Bank of Japan's new inflationary policy.

Some Western gold-fund managers, as well as Japanese gold-market consultants, have been predicting a sharp rise in gold demand from Japan's pension-fund industry thanks to anxiety over inflation and the devaluation of the Yen.

The Bank of Japan has now held its key interest rate at zero since 1999. It began quantitative easing (aka "printing money") a decade ago.

Yet consumer price inflation has since failed to breach 1% per year. On an annual basis, Japanese gold demand peaked in 1995 – the year of the Kobe earthquake – around 290 tonnes, according to data compiled by market-development organization the World Gold Council.

Japan's net gold demand turned negative in 2006, with private investors dishoarding more than 42 tonnes of gold coins and bars, outweighing jewelry demand of 33 tonnes as Yen prices rose to 20-year highs.

At this week's new 30-year record high gold prices, those sales cost Japanese households ¥112 billion (US$1.24bn).

Despite the launch of gold-backed exchange-traded ETF trust funds, targeted at professional and institutional investors, Japan's net gold demand has remained negative over the last six years.

According to the World Gold Council's latest data, however, the 12 months to October 2012 saw private Japanese gold demand virtually balanced.

Despite outweighing Tanaka's customer demand yet again, the Tokyo-headquartered business said today that its purchases of gold bullion fell by 62% in 2012, dropping to 28.6 tonnes. Sales fell by less, down 36% to 22.9 tonnes.