US propping up ¥ - Undercurrent supportive of gold

Look at this headline, USA and Japan worked together to prop up the yen. See Pic 2.

The ¥ (as a currency) has weakened a fair bit (over 30%) since 2022.

Remember government debt to GDP is over 200% in Japan vs. 120% in USA.

There is no way out for Japan. It cannot afford to raise interest rate to support the currency. Currency is thus taking the hit.

If we take it to the extreme, this is the future scenario facing many countries in the developed world, including USA, UK, Italy, France. Governments in general lack the courage to do the hard yards like balancing the budget.

Citizens in many countries will realize at some point paper money may well be paper thin.

As gold is denominated in USD, as USA sells dollar to buy ¥, supportive of gold price.

Something else to watch is US Fed. The Fed did not raise during the last meeting. If the Fed holds again in the coming meeting, it will weaken another narrative against gold.

All in all, cracks appearing in the AI trade (but I think a bounce is due), investors need to cast their net wide for other ideas. Gold and gold equities have had a tough run... Sentiment feels cold (look at the small/micro cap miners in Australia). Not an un-interesting backdrop.

My view remains some junior gold miners in Australia are prospective investments in coming years.

PS.. Not investment advice. Do your own research.