The New CARRY TRADE - yen exiters heading this way
Japanese institutional investors crash hedge fund short positions in gold and silver with a tsunami of money
Posted on 10 April 2013
A tsunami of money is crashing the short positions in gold and silver held by global hedge funds which veteran gold traders think is going to result in a massive leap for gold and silver prices over the coming months. The hedge funds simply did not forecast the Bank of Japan printing money on the scale it announced last week.
Japanese institutions are reverting to the well-known ‘carry trade’ whereby they borrow cheaply in yen and invest overseas in assets with higher returns. That is not so difficult when Japanese money costs a fraction of one per cent and many other asset classes still pay more but there is a severe devaluation downside risk.
QE boosts gold and silver
The QE1 and QE2 money printing programs totaling $2.5 billion from the Federal Reserve took silver prices from $8 to $50, a stunning 525 per cent increase in 30 months from the low point of 2008. Gold was up $680 to $1,923 in 35 months, gaining 183 per cent.
Top trader Dan Norcini told KWN today that Japan’s $1.4 billion-a-year QE program sets the gold and silver market up for similar gains today. That would mean silver trading at around $135 an ounce and gold up to $2,800.
There is no reason why prices should not overshoot to the upside this time around. History seldom repeats itself exactly and the expansion of the monetary base is now entering a dramatic new phase.
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Because this is for all the marbles, the mainstream media will pull out the stops to get the big institutions out from their short positions in gold and silver. Goldman was up today. Maybe someone new tomorrow? Bill Gross now interested in treasuries? Yeah, right. The window of opportunity here is closing. You should take advantage and get in here, before the fundamentals take this to new highs...