A scramble by Japanese investors for safe havens after a deadly earthquake has pushed physical gold premiums to three-year highs as buyers in less affected parts of the nation stretched supply, unleashing a trend that could give a lift to world prices.
Buying of the precious metal by investors and households in the west of Japan, combined with transport woes in the world’s third largest economy, usually a net gold exporter, could dry up supplies elsewhere in Asia, and inevitably push up world prices.
Investors in Japan dived into yen-denominated markets such as TOCOM gold after concerted intervention by the G7 group of nations weakened the currency against the dollar last Friday, a day after the yen rose to a record high of 76.25.
Any hoarding or buying of the precious metal by Japan’s investors, who sold 50 tonnes of bullion back to dealers last year, could provide a spark to touch off global prices.
But the appetite for gold revived by Japan’s devastating 9.0-magnitude quake and the ensuing tsunami, estimated to have killed more than 10,000 people, could hurt supplies across Asia, by cutting into the country’s exports of gold, which stood at 78 tonnes in 2010.
TOCOM gold futures significantly underperformed in the four days immediately after the March 11 quake as investors sold gold to cover margin calls in equities, which slumped almost 20 percent.
But both markets have since partially recovered, with TOCOM gold up 4.4 percent on the day on Friday, trading above 3,720 yen an ounce, but 1 percent down on the week, having dropped by as much as 6.8 percent since the earthquake.
Spot gold hit a record high of $1,444.40 an ounce on March 7, and was trading above $1,425 on Monday.(RTR)