MW: Gold and the yen compete for Asia's affections
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) -- In a world where investors are scrambling to stem hefty losses, gold and the Japanese yen are unlikely adversaries.
"Gold and the JPY [Japanese yen] are two of the few assets that have appreciated since the Lehman collapse in September 2008," James Steel, an analyst at HSBC Securities said in a recent note to clients.
With gold trading around a six-week high of more than $1,200 an ounce and the yen (USDYEN 85.2900, -0.0400, -0.0469%) recently hitting a 15-year high against the U.S. dollar, both have proved to be reasonably safe investment vehicles, even as Asia's major stock markets continue to sink. See Monday's Metals Stocks column.
In early afternoon trading Tuesday, Japan's Nikkei Stock Average was 0.7% lower after already posting losses in six of the last seven sessions.
Hong Kong's Hang Seng was down 0.1% while Australia's S&P/ASX 200 added 0.4% and South Korea's Kospi added 0.5%. All three indexes logged losses in four of the last five sessions.
Strength in gold prices helped lift shares of some Asian gold producers, with Lihir Gold Ltd. (AU:LGL 4.38, +0.02, +0.46%) (LIHRF 3.90, +0.09, +2.36%) up 0.5% and Eldorado Gold Corp. gaining 1% (AU:EAU 19.96, +0.26, +1.32%) (EGO 17.97, +0.36, +2.04%) in Sydney. But others took their cue from broader weakness in the region, with Sumitomo Metal Mining Co. (JP:5713 1,076, -5.00, -0.46%) (STMNF 13.53, -0.77, -5.37%) losing 0.9% in Tokyo, Zijin Mining Group Co. (HK:2899 5.38, -0.02, -0.37%) (ZIJMF 0.61, -0.12, -16.44%) down 0.6% in Hong Kong and Shandong Gold-Mining Co. (CN:600547 40.97, -0.43, -1.04%) slipping 0.2%.
Meanwhile, the stronger yen took a toll on many of Japan's major exporters on continued concerns over company profits, helping to pull shares of Mazda Motor Corp. (JP:7261 198.00, -2.00, -1.00%) (MZDAF 2.30, +0.02, +0.88%) lower by 2.5%. Renesas Electronics Corp. (JP:6723 662.00, -1.00, -0.15%) (RNECY 4.06, -0.14, -3.33%) was down 2.4% and NEC Corp. (JP:6701 218.00, -1.00, -0.46%) (NIPNF 2.20, -0.15, -6.38%) was down 1.4%.
Yen in the lead
For now, they yen appears to be a clear winner over gold for Asia's affections.
"The yen is definitely the preferred safe-haven investment right now over gold, which has only moved slightly higher," said Kathy Lien, director of currency research at GFT.
In recent dealings, one U.S. dollar bought ¥85.25, down from ¥86.26 late Friday in New York. See Monday's Currencies column.
"Typically gold is bought as an inflation hedge as well, but the deflationary environment that we are living in right now makes it less attractive," said Lien.
"In the end, meaning 8- to 16-months from now, I think gold will be the winner -- but right now, the yen is the preferred trade," she said.
Complicated relationship
Richard Hastings, a macro and consumer strategist at Global Hunter Securities points out that the relationship between gold and the yen is actually a bit more complicated.
"The stronger yen serves the purpose of reducing the buying cost of gold," he said. "Thus, it's not simply a doubt about the dollar's health -- instead, it's about leveraging slight weakness in the relative value of the dollar to find absolute strength someplace else."
