Japanese pension funds and ETPs to buy $550 million in gold over the next two years and what about joe public?

Japanese pension funds and gold-backed exchange traded products are going to more than double their gold holdings over the next two years to $1.1 billion, buying some 27 tons of gold at current prices, according to veteran World Gold Council representative Itsuo Toshima who is quoted today on Bloomberg.

His warning comes as new prime minister Shinzo Abe has pledged to push inflation to two per cent leaving Japan’s pension funds no option but to hedge against a weakening yen. Japanese investors have long ignored gold as irrelevant in their depressed, inflation-free economy. That is set to change.

Gold’s return

‘Bullion’s role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to Abe’s economic policy,’ said Mr. Toshima. ‘Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe’s target is realized.’

The Government Pension Investment Fund of Japan, the operator of the world’s largest pension fund has avoided bullion and commodities and has 67 per cent of their assets allocated to Japanese bonds.

‘Pension money invested in bullion is ‘peanuts’ at the moment,’ Mr. Toshima added. ‘If one per cent of their total assets shift to the metal, the gold market would explode.’

Joe public?

ArabianMoney concurs and we also wonder what will happen as the Japanese public catches on. They are among the greatest savers in the world and also huge holders of domestic bonds.

Is this not the transfer from bonds to the very tight gold and silver markets that we have been talking about for some time now? The price upside for precious metals in this transfer is going to be huge because there is a collossal value stored in paper and to absorb that money bullion will have to soar in value.

We think the Japanese market is the one to watch at the moment for the next step in the global financial crisis. This is it, a bond crisis in the making and a massive transfer of wealth into gold and silver.

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