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Posted by on Mar 29, 2016 in Market Insight

BOJ Making It Up As It Goes Along?

BOJ Making It Up As It Goes Along?

March 29, 2016

Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.

There is talk that Japanese Prime Minister Abe is already considering doing away with the consumption tax increase that is set to go into effect one year hence. The tax was increased in ’14 from 5% to 8% and that caused the Japanese economy into a modest but very real recession, and hoping to avoid the same result, the increase from 8% to 10% is now being considered as being taken off the table. Abe has been counseled by the likes of Drs. Krugman and Stiglitz, who met with Prime Minister Abe at the latter’s private residence earlier this month, to postpone or even perhaps do away with the tax entirely. We rarely find ourselves on the same side of any economic question involving either of these left-of-centre economists, but in this we agree…wholeheartedly.

It is thought that Abe will use the upcoming G7 meeting economic summit in late May…May 26-27th to be precise, to be held at the Shima Kanko Hotel on Kashiko Island in Shima, Japan and this time it will be a G7 and not a G8 meeting, because Russia is still under a series of economic sanctions due to its activities in Ukraine… to announce his decision to postpone the tax increase. Mr. Abe, of course shall be the meeting’s Chair because the meeting is held in Shima.

In fact, there is talk that Mr. Abe shall call for an election… an early one… for both the upper and lower houses of the Diet. The Upper House has to have an election this summer, but the Lower House is not required to have another election for several years. Abe, however, with reasonably high public support levels… at least reasonably high in comparison to past Prime Ministers this far along in his office tenure…is seriously considering having both houses go to the public for support given that his opposition parties are, at present, disoriented and dis-unified.

Turning to the precious metals we note firstly that gold is steady to just a bit weaker, while the more “industrial” metals… silver/platinum and palladium… are all a bit stronger. The bull market that began late last year continues but not without some very real, and at times very disconcerting, weakness that has developed over the course of the past several weeks. To say that we are not somewhat disconcerted would be wholly disingenuous, for indeed we are concerned, but so long as the trend line drawn remains intact we shall try our very best to remain consistently bullish of gold.

Clearly we are concerned that gold has not only failed to make new and higher highs, as it does appear to have established a rather formidable “top” formation over the course of the past several weeks.