December 30, 2002
A Golden Year

Somewhere in Japan there is an investor clasping his gold bullion and dreaming of future investment opportunities. However, what this investor is not preparing to do is invest in the Nikkei.  Rather, and regardless of the fact that the Nikkei is hitting 20-year lows, some Japanese investors are comforted only by bullion. One might ask: why doesn’t the Japanese investor try to continually pick the ‘bottom’ of the market like their American counterparts?  Well, they have been trying for more than a decade, but to no avail.


Japanese Gold Demand

 

(Tonnes)

1Q00

18.4

2Q00

26.5

3Q00

30.7

4Q00

29.6

1Q01

23.4

2Q01

21.2

3Q01

36.8

4Q01

32.5

1Q02

57.2

2Q02

29.7

3Q02

28.7

In early 2002, faced with the prospect of tough new banking regulations that could potentially rock the financial markets, many Japanese investors exchanged Yen for bullion. In fact, thanks in large part to hard buying from Japanese investors in February gold finally broke and held $300 an ounce this year.

2002 will surely be remembered as a year of corporate scandals and bankruptcies.  However, above all else, and paying no attention to the overly anxious analysts that proclaim the U.S. equity markets bottomed in October, 2002 was the year gold solidly broke out of a multi-year (make that multi-decade) slump and regained $300 an ounce.

This Week
Due out this week is existing home sales (Nov), the Conference Board’s take on consumer confidence (Dec), Chicago PMI (Dec), the ISM Index (Dec), and construction spending (Nov). It is not certain if any of these reports will have much of an impact on the markets as stocks will need to cope with a final wave of tax loss selling and geopolitical tensions do not seem to be abating.  Nevertheless, on January 2 life begins anew…

Happy New Year!


BWillett@fallstreet.com

 

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