"...How can this be good for gold? Put yourself into the shoes of the Japanese investor. He has suffered deflation for so long he regularly invests in other currencies to gain the interest rate differential as well as the gain in foreign currencies over the Yen when it falls. With the B of J telling these investors they want to lower the Yen, these investors, when convinced this is about to happen, will follow this route more enthusiastically.
If he believes inflation is about to take off, he knows that in the present global environment the B of J cannot afford to let interest rates rise [and take the Yen with them]. He then realizes that the buying power of the Yen is being reduced by such stimuli. Inevitably, once the Yen has been undermined by QE, interest rates will eventually have to rise, to counter excessive inflation. With this in mind both cash and fixed income securities lose their attraction. A hard asset that cannot be debauched is preferable. Locally this can be anything from property to gold. The advantage of gold is that it is well known to the Japanese and it travels all over the world. History also shows that gold has proved itself the certain retainer of value in all extreme times including both deflation and inflation.
In view of this we believe that the Japanese will turn to gold, once they see the policies intended to lower the Yen, working."
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