Japan is Crashing – Gold is the Answer

Dear readers,

Today, we confront a chilling economic reality: Japan is not just facing a downturn; it's a symptom of a broader global malaise that threatens to disrupt our understanding of economic stability. By the end of this newsletter, you will understand why we have entered a new era of structurally high inflation and diminishing currency purchasing power, and why tangible assets, particularly physical gold stored securely outside the banking system, represent a critical solution.

Historic Surge in Gold Prices

Gold is not merely increasing in value; it is making history. As you witness this extraordinary moment, it's essential to understand the significance of what this means for you personally. This is not just an ordinary price surge, but the dawn of a new era for precious metals. Since the start of the year, gold has risen over 20%, and astonishingly, it has surged over 800% in the last 20 years in USD terms, equivalent to an annual return of 9.78%. From a modest $288 per ounce at the end of 1999, it now stands at $2514. Let's delve into the reasons behind this meteoric rise.

The Catalysts of Change

The global landscape has faced myriad challenges that have spurred massive financial interventions, each contributing to the fire of inflation:

• Banking Bailouts: Notable bailouts during the 2008 and 2009 financial crises in the USA, and similar interventions during the Euro crisis. Solution: money printing.
• Fiscal Stimulus: Extensive governmental spending to rescue the real economy in 2020 and during various other crises. Solution: money printing.
• Environmental Costs: To achieve the ambitious 'Net Zero' goals by 2050, an estimated $1.6 trillion is required annually. Solution: money printing.
• Defense Spending: With geopolitical shifts and preparation for potential large-scale conflicts, notably between the USA and China, defense expenditures are rising rapidly. Solution: money printing.

Japan's Dire Struggle and why This Spells Bullish News for Gold

A Bank of Japan board member has recently stated that the central bank will continue raising rates if inflation continues to be consistently above the bank's target.

The Bank of Japan, between 2020 and 2024, has nearly devastated its currency (USDJPY moving from 100 to 160), spending over $160 billion last year to bolster the yen. Despite these efforts, foreign investors continue to bet on a weaker Yen.

The high inflation, and the Bank of Japan’s potential policy reversal, highlight their misunderstanding of the debt monster they've created of the last decades. There is no way out of that trap. Gold, expressed in JPY, illustrates just how dire the situation is; It looks like gold has risen but this is an optical illusion. What this picture tells us is that it requires more and more Yen to buy the same amount of gold. And it seems that yen's collapse in purchasing power in terms of gold has been accelerating recently.

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Market Turbulence and Its Implications

Therefore, it should not come at a surprise that the Japanese markets recently experienced some of the most extreme fluctuations in decades, triggered by the unwinding of the famous yen carry trade and an historic stock market crash—the worst since October 1987. My colleague Cédric Spahr suggests that the unwinding of the yen carry trade is far from over, with many speculators positioning for another round of yen appreciation, signaling more chaotic times ahead. I fully agree with him, and I expect this will inevitably impact your investment portfolio.

A Cautionary Tale from Japan

Choosing Japan as an example is intentionally; it shows the consequences of sacrificing a nation's currency. Once considered an economic superpower, Japan's economic influence has now regressed to levels not seen since 1950, starkly illustrating the lifecycle of rise, dominance, and decline even economic superpowers endure.

A Warning for the West

The structural problems Japan faces—exponential growth in total debt, aging demographics, and the end of an era of prolonged peace and globalization—are not unique. The West is on the same trajectory, and no political party can stop this phase of the lifecycle.

Forecasting Gold’s Bright Future

Based on these factors and historical patterns observed at the end of nearly multi-generational credit cycles, I see significant potential for gold prices in the coming months. We could witness a historic rise that eclipses all past records. Analysts from Bank of America and Citi predict that gold prices could reach $3,000 per ounce within the next 18 months. At Geopolitical Wealth Insider, our models suggest even higher prices if geopolitical tensions escalate as we anticipate. Non-NATO countries are pushing to increase their gold holdings as can be seen in the next chart.

Stay Informed, Stay Prepared

This unfolding scenario isn’t just an economic issue—it's a harbinger of broader global geopolitical power shifts. By investing in gold, you are not just preserving wealth; you are preparing for a future that increasingly seems both uncertain and inevitable.

Subscribe now to our newsletter and stay informed about ongoing developments in these critical times.

Thank you for your attention. May we navigate these turbulent waters together with wisdom and foresight.

Best Regards,

Dr. Dietmar Peetz