Are the Gold and Silver ETFs backed by precious metals?
September 30, 2009 by admin · Leave a Comment
The latest concerns about the Gold and Silver Exchange Traded Funds (ETF’s) comes from John Embry of Sprott Asset Management. John has been speaking at the Silver Summit in Spokane, Washington where he has expressed doubts about the precious metals ETF’s actually having the metal that they claim to have.
The report has been compiled by MineWeb’s Dorothy Kosich and is headlined, “Sprott’s Embry Warns Investors to Make Sure ETFs Backed by Precious Metals”
Jim Sinclair on the dollar, inflation, gold and silver
GATA, China and Gold Price Suppression
September 29, 2009 by admin · Leave a Comment
Weekly Wanderings 29 September 2009
As usual in these weekly wanderings we present you with topical and interesting items we’ve come across during the week…
This week, over at King World News , Eric hosts a fantastic audio interview with Bill Murphy and Chris Powell, of the Gold Anti-Trust Action committee (GATA). We consider this to be an important and revealing piece, and make no apology for making the contents the centerpiece of our column for this week. You can listen to the audio here, and we summarise the main points alleged in the interview below…
- The Federal Reserve has admitted in correspondence with GATA that is has gold swap arrangements in place with other central banks. This admission is of major importance because it openly confirms that the Fed has the power to actively intervene in the gold market, if this be deemed necessary.
- GATA has been trying to gain information relating to the operation of the gold market for more than 10 years – to be fobbed off at every turn, despite the so-called Freedom of Information act. This admission marks a major breakthrough.
- The Fed intervenes surreptitiously in many markets, in particular it suppresses the price of gold to make the US dollar appear stronger.
- The “audit the Fed” proposal before Congress is gaining momentum. The Fed, whose operations are cloaked in secrecy, itself seems to have the view that if its operations became public knowledge, then the world would collapse. Alan Blinder, a former Fed official stated on US public TV, that “the last duty of a central banker is to tell the public the truth”.
- If the claims made by GATA that half or more of the US gold reserves are gone are shown to be correct – and they have been very carefully researched – then this may spell serious trouble for the dollar.
- Gold price suppression, if it indeed has been, and is, taking place, is the foundation of the manipulation of all markets, leading to reckless over-consumption in the US itself, and impoverishment of the rest of the world, particularly the developing world, due to artificial dollar strength.
- With regard to the gold price at present, the central banks are taking on China. Jim Sinclair of jsmineset.com has pointed out that when central banks go up against countries, they are faced with opponents that are as powerful as they themselves…in terms of the depth of their pockets.
- GATA is, and has been, in discussions with senior economic advisors in both Russia and China – with Chinese officials over the last 18 months. Chris Powell remarked that he had been present last year at a dinner of the Committee for Monetary Research and Education in NY, at which Professor Robert Mundell stated that he had advised the Chinese government to buy any and all gold that might be sold by the IMF. The Chinese are concerned not to initiate a drastic plunge in the value of the dollar, but they have to hedge against their massive dollar position, and one way to do this is to continue buying gold.
- The battle is now joined between the financiers – the central bankers – and the producers – the productive sector of the economy. It is not an exaggeration to say that the proposal to audit the Fed, if it is allowed to be passed, could significantly influence the destiny of everyone in the US and the rest of the world, by causing a seismic change in the relative values of worldwide capital and labour markets.
Professor Fekete: Why Barrick Gold has ended Gold hedging
September 28, 2009 by admin · 2 Comments
Following on from our earlier article “Why are gold mining producers reducing their gold hedge books?” is the recent announcement by the worlds biggest gold producer Barrick Gold, that it too is finally unwinding its profit strangling forward gold sales contracts.
The following article is by Professor Antal Fekete a monetary scientist we very much respect. It is an in depth analysis as to why Barrick has now finally chosen to end it’s hedging policy and further proof that the gold price is only going to climb. Or rather should we say that the value of paper currency is going to continue to dwindle.
But the great news is, if you have the desire to learn more about gold from a man with a great mind and can be in Auckland on Wednesday the 28th October, there will be a fundraising dinner for the Ficino School, sponsored by NZ Mint. The professor will give an address on ‘A Forgotten Centenary’, which will be about legal tender. This is what Professor Fekete sent the dinner organiser, as a teaser:
This year we have just passed the one hundredth anniversary of an event that, more than any other, was responsible for the misery of millions of people in the twentieth century, and possibly beyond. This event was responsible for world wars, revolutions, destruction of life, wealth and property, mass unemployment, famines, endless civil wars, not to mention the loss of individual rights.
The world has passed in silence the centenary of legislation making the bank notes of the Banque de France and of the Reichsbank of Germany legal tender in 1909. This event has been stricken out of the collective memory of the world, the very event that opened the gates to financing the world war through credit.
In discussing the significance and consequences of legal tender legislation in my address I want to do justice to the historical significance of this forgotten anniversary.
It will be a very interesting night we reckon! It’s formal dress with great food and wine. Visit GoldStandard.co.nz for further info and to book tickets. There is only room for 150 so this will sell out. And now, we feature the Professors latest article…..
HAS BARRICK BEEN BARRICKED BY THE U.S.?
Antal E. Fekete
Professor of Money and Banking
San Francisco School of Economics
According to an announcement dated September 8, 2009, Barrick is going to throw into the dustbin its long-standing hedge policy, and pay for buying back its hedge-book by diluting the value of its common stocks through issuing more than 81 million new shares, or about 10 percent of the outstanding. The so-called hedges of Barrick have been thoroughly discredited and will soon be history. So-called, because the long-term forward sales contracts in question that the parvenu gold miner has invented and flaunted are not proper hedges and never have been. They are a fraud. They are naked short positions pretending to be balanced by gold ore reserves in the moon (or on this earth which, for hedging purposes, is practically the same thing). Part of the newsworthy story, of course, is the fact that the hedge book of Barrick has been increasingly under water for some nine years now, threatening the unfriendly giant with drowning.
Within 24 hours another hasty announcement was made to the effect that the company, instead of issuing 81 million new shares, will in fact issue 94.4 million, that may be raised to 109 million if the demand justifies it, for a total value of $4 billion — the biggest primary equity offering in Canadian history according to the local media. The hike was explained by “strong investor demand”. The market, however, put a big question mark to that “forward looking statement” of the company in marking down Barrick shares 6.85% on the same day to $36.61, the greatest percentage loss among the leading gold mining shares on the day. Incidentally, in doing this the market has put a lower value on the Barrick stock than the company did. Barrick is offering its new issue at the price of $36.95 per share.
The $1.9 billion that Barrick is hoping to raise through this dilution maneuver to eliminate all of its fixed-price gold contracts falls far short of its goal of buying back its hedges.
The liability represented by Barrick’s once flaunted forward sale contracts has been carried off balance sheet so far. These fixed-price gold contracts have a negative value of $5.6 billion, that will be charged to earnings in the third quarter. This negative value will almost certainly increase during the next 12-month period Barrick gave itself to get out of the quicksand. The announcement itself is a virtual guarantee of that: Barrick will have to compete in the gold market with China, Russia, India, Brazil, and other countries (not to mention other gold mines in dire need to de-hedge) for a diminishing amount of gold available for cash delivery, to the tune of 9.5 million ounces in today’s strained gold markets.
The big unknown question is whether Barrick will be able to buy back its hedges fast enough to stop the continuing hemorrhage. Barrick is racing against the clock. Gold is still available for cash delivery, but in what quantities? and for how long? 9.5 million ounces is an awful lot of gold to buy in today’s anemic gold markets with supplies drying up fast. With the threat of the last contango and of permanent backwardation hanging overhead like Damocles’ sword, Barrick’s plan appears to be a pipe dream that will never be fulfilled. I may be in a minority of one on this one, but Barrick’s future is anything but rosy. 9.5 million ounces is a lot more gold than Barrick is able to produce in an entire year in the best of circumstances.
Even if Barrick were to sell not one ounce of gold in the open market for a whole year, but deliver every ounce it extracts from the bowels of the earth to its hedge books, and even if we accept the most optimistic assumptions of the company to increase its annual production as realistic, there is still a shortfall of at least 1.5 million ounces. I submit that Barrick could not survive if it was to suspend its sales of new gold in the open market for a whole year, while facing the extra cost of forcing up production quotas. No lender in its right mind would finance such a crazy plan. Creditors of Barrick would be all too happy to put the unfriendly giant on the block, and sell Barrick’s stellar resources to the highest bidders, who would be able to manage them in a saner and more responsible manner than present managers have.
Barrick’s managers were given the right advice twelve years ago that, at the end of the road they have chosen, lies ruin and misery. They had all the time to change course. But even at the last major announcement on “hedging” in 2006, when Barrick announced its new policy to lift a part of its hedges, the then CEO Greg Wilkins said at the Annual Shareholders Meeting that Barrick will always retain ‘a reasonable’ amount of hedges as an ‘essential risk-management tool’. According to Wilkins, it is supposed to ‘stabilize’ revenues, and it is supposed to satisfy banks that finance Barrick’s projects.
Two years ago I issued a public challenge to the management of Barrick in my piece “Have Gold Bugs Been Barricked by the U.S.?” as follows.
I demand an answer why Barrick ignored my recommendation in 1997 which I personally presented to the then CFO Jamie Sokalsky. During those ten years my worst fears have materialized. It turned out that the “hedging” policy of the company was, as I had stated, deeply flawed. It was an unmitigated disaster of the first magnitude. It resulted in horrendous losses to shareholders. It is not clear why Jamie Sokalsky, widely rumored to be the author of Barrick’s “hedge plan”, got rewarded with a promotion for executing a disastrous policy, and why his new boss Greg Wilkins has stated in public that the company is standing by its original hedging policy, albeit on a reduced scale. I categorically state that Jamie Sokalsky had been thoroughly familiar with the alternative, what I called the correct principles of hedging. He and I discussed the subject together at great length, and he received from me a Memorandum that spelled it all out. This Memorandum found its way into the book of the late Ferdinand Lips entitled Gold Wars and can be seen there by any interested party.
I am disclosing it now for the first time that Barrick has ignored my challenge. Yet, as its announcement of September 8 last proves, I was right all along. The “hedging” policy of
Barrick was so obviously insane, so much in conflict with any common business sense, that it invited extensive speculation that Barrick was not really a profit-seeking business. It was just a front set up and operated by the U.S. (and/or by other governments) in order to cap the gold price.
In other words, Barrick has been a partner to the greatest conspiracy in all history: to throw dust into the eyes of the investing community making it believe the gold demonetization fable. If the conspiracy theory is true, then the linchpin to cap the gold price has been Barrick’s hedging policy. By aggressively selling gold forward at the expense of the shareholders, the gold price could be kept in perpetual check — or so the script went. Just make Barrick the world’s Number One gold producer, its hedging policy will frighten the daylight out of any bullish speculator in gold. And we might as well admit that the conspiracy has been rather successful, in so far as conspiracies can ever be successful.
In the article quoted above I made it clear that I was not a subscriber to the conspiracy theory, although I reserved my right to change this opinion pending future evidence as they become available. A major piece of evidence has just surfaced. Barrick has unceremoniously discarded its long-cherished hedging policy, paying a heavy price in dragging the underwater hedges into its badly punctured balance sheet that was no longer fooling anyone, and in having to dilute the value of its outstanding shares.
Have I changed my mind about the validity of the conspiracy theory? Is it not an appealing interpretation that a decision made by policymakers in the U.S. Treasury and the Federal Reserve deemed that the cost of maintaining the gold cap at $1,000 is becoming too high? The cap can no longer be defended in view of the world’s global credit crisis.
Subsequently Barrick was to be dumped and let to fend for itself in the rough waters after the sinking of SS. Lehman. Barrick has received what it has so richly deserved: it has been barricked by its partner in crime.
The supreme irony of this scenario would be hard to escape. This would not be the first time that a creature of Peter Munk has been barricked by a government. There are some older guys around still, like myself, who remember how the government of the Canadian province of Nova Scotia has barricked Munk’s top line radio and hi-fi console manufacturing business. At that time Peter Munk swore that he would never ever again accept a government subsidy, nor would he participate in a conspiracy involving governments. It is all related in Peter Munk’s approved biography in great detail (see References below). Every business initiative of Peter Munk has ended as a fiasco and he went bankrupt in consequence. After his radio and hi-fi business shipwrecked on the rocky coast of Nova Scotia, his real estate enterprise in Egypt failed where he was to build luxury hotels in the shadow of the great pyramids. His dabbling in oil fared no better. Rumors have it that he also financed a franchise in Israel of Colonel Sanders’ and his boys to make pork chops “fingerlickin’ good” — that failed, too, although this could not be confirmed.
After an unbroken series of business failures Peter Munk has come to gold. Would gold be kinder to him? There is hardly anybody alive who could appreciate gold’s value better than he would. He owes his Holocaust survival to gold that was paid by his father to Eichmann through Swiss intercession for their free passage from Hungary to Switzerland in 1944. Yet there is probably no one in the long line of failed gold mining executives who misconstrued gold more thoroughly than Peter Munk has. Conspiracy or no conspiracy, Peter Munk is an inveterate believer in the power of the U.S. government to manipulate the price of gold. That is the secret of his downfall. Peter Munk’s gold business is no better than his other businesses have been, only bigger.
I am still not committed to the conspiracy theory according to which Barrick has allowed itself to be used by policymakers in the U.S. to cap the price of gold, although I must admit that the circumstantial evidence has become a notch more circumstantial with this latest announcement. To me it looks like the desperation of a passenger aboard the sinking Titanic who has lost his life saver. I base my judgment on the timing. To make such an announcement at a time when the gold price is challenging the $1000 level is a miscalculation of Babelian proportions, not to say a suicidal dash to the exit. All this time was wasted, while the gold price was under pressure, when exactly the same announcement would have been helpful to Barrick — as it has to Newmont. It is too late now. I do not see how Barrick can remain a viable business entity once it has lost its tether, real or imagined, tying it to the U.S. Treasury.
My sympathy is with the shareholders of Barrick, who are going to fare no better than those of Lehmann Brothers. What people do not seem to understand is that gold locked up in ore is one thing, and gold locked up in vaults is another. There are times, such as now, when their values part company. Why? Because too many gold mines are just a conduit to make the shareholder and his money part company. Remember Mark Twain having said that a gold mine is a hole in the ground with a liar standing guard? Remember Bre-X? It is so much easier to fool people than doing the back-breaking work of bringing up gold locked in the ores deep underground.
Aaron Regent, the new President and CEO of Barrick, commented on the company’s
announcement as follows:
“The gold hedge-book has been a particular concern among our shareholders and the broader market which we believe has obscured the many positive developments within the company. As a result of today’s decision we have addressed that concern and maintained our financial flexibility. With the industry’s largest production and reserves, Barrick provides exceptional leverage to the gold price, which we expect will be further enhanced as we build our new generation of low-cost mines.”
But leverage works both ways. In the case of Barrick it has always worked the other way. Mr. Regent sounds as if the troubles of Barrick were now over as management has finally decided to bite the bullet. They are not. The agony will last until the last vestiges of the nightmare of “hedging” will be erased. Even in the optimistic appraisal of management it will take at least one year. In reality, it will take much longer, as ever higher gold prices will frustrate efforts to close the hedge-book for once and all. The fact is that the wolf is at the door and refuses to leave. The problem of the hedge-book will keep resurfacing, until everybody will understand that it is unmanageable. The cat is chasing its own tail.
The job cut out for Barrick is the job of Sysiphus. He was a king who betrayed Zeus’ secrets. As a punishment he was confined to Tartarus and made to roll up a boulder to the top of the mountain only to see it falling back, and his travail would start all over again.
When everybody sees Barrick as the latter-day Sysiphus, the company will give up the ghost, and the cheerful creditors will happily carve up the rich caracass, with former shareholders looking on in dismay.
What If Everyone in the World Wanted a 1-ounce Gold Coin?
September 27, 2009 by admin · Leave a Comment
Today we have an article care of Casey Research’s Jeff Clark. Jeff is Senior Editor of Casey’s Gold & Resource Report. The Gold & Resource Report covers a portfolio of mid- to large-cap precious metals and natural resource producers , ETFs, mutual funds, and more. Now over to Jeff on just how small the global gold supply is and what this means for the future…
By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report.
If we’re right about where the price of gold is headed, the general public will someday clamor to buy all things gold. While gold stocks will be where the real leverage is, the rush will start with gold itself. As a gold editor, I have a very natural question: is there enough to go around?
According to the U.S. Census Bureau, there are 6.783 billion earthlings. Meanwhile, CPM Group, a highly respected industry organization, estimates there are 4.8 billion ounces of above-ground gold in the world. And this includes jewelry, electronics, and dental. So, even if everyone around the world volunteered to have their chain, cross, or tooth melted into a coin, we’re already short. Those towards the end of the line are out of luck.
However, it’s worse than that. Of all the physical metal ever mined…
• 2.1 billion ounces, or 43%, is found in jewelry, decorative, and religious items.
• Private stock – gold already held by various private parties – accounts for 1.1 billion ounces.
• Official reserves (central banks, IMF, etc.) stand at 1 billion ounces.
• Industrial use accounts for 530 million ounces.
Very little of this is likely to come available for purchase in coin form. After all, you’re not selling any of your gold, and neither are many banks or institutions. Most everyone is buying.
So for those who don’t yet have a gold coin (or you greedy investors who want more than one), this pretty much leaves us with mine production and scrap sources.
CPM forecasts that total new supply in 2009 will be around 122 million ounces. Only a small percentage of this is made into gold coins and bars, but if all of it were, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth this year. A product of this dimension is about half the size of that small button on your shirt collar.
Since this supply is only available annually, it means 0.018% of the global population – one in every 55 people – could buy a one-ounce gold coin this year. Or, said differently, it would take 55 years before everybody had one, assuming the population never increased (it is) and supply never decreased (it is).
But it’s worse than that. Actual 2009 coin production will be around 5 million ounces (excluding medallions or “rounds”), leaving two one-hundredths of a gram of gold (or 0.3 of a grain) available this year for each of the planet’s inhabitants. This is about half the size of the sesame seed that fell off your hamburger bun at dinner last night. It means that only 0.0007% of earth’s citizens – or one in 1,356 – can buy a one-ounce gold coin this year, and it would take 1,356 years for everyone to get one.
How’s that for a supply squeeze?
But it’s worse than that. Demand continues rising. Gold is more frequently in the news, attracting more customers every day. Hedge funds, which never before considered gold, are now buying physical metal (Greenlight Capital actually sold $500 million of GLD and bought physical gold). Central banks are net buyers of gold for the first time in 22 years. China is running TV ads encouraging its citizens to buy gold and silver. Last month Russia bought more gold than they actually produced. In a recent survey, 20 out of 22 fund managers bought physical gold for their personal investments. In other words, some investors are already scrambling to get it… and in big quantities.
But it’s worse than that. Most of the ramifications of the money printing and dollar debasement haven’t even surfaced yet. How will the general public react when the dollar is crashing and standards of living are threatened? What will they do when milk and gas prices surge to twice what they are now? How will the greater collective respond when they lose faith in government interventions? Where will they invest when they see gold and silver prices screaming upward and don’t want to be left behind?
The panic into gold by the general public hasn’t begun yet. Available gold supply is scarce and will get smaller. There won’t be enough.
Better get your speck while you can.
You can learn 9 different methods of buying gold including 6 ways to buy physical gold bullion here.
Anglo Saxon Gold Found by Metal Detector Enthusiast
September 25, 2009 by admin · Leave a Comment
A metal detector enthusiast has found around 5 kilos of gold and 2.5 kilos of silver on a farm in Staffordshire.
Based on todays bullion prices, 5 kilos of gold is worth in New Zealand dollars around $226,972. However, as these were precious artifacts this will raise the value to at least ten times more.
Mr Herbert, who has been metal detecting for 18 years, came across the gold and silver treasure on July 5th after asking a farmer friend if he could search on his land.
Staffordshire County Council, Birmingham Museum and the Potteries Museum and Art Gallery have already discussed buying the treasure jointly. The money is paid to the finder, who usually gives half to the landowner — suggesting that both Mr Herbert and the farmer stand to receive a substantial sum.
Under the 1996 Treasure Act in Britain, anyone who finds a group of coins buried together, or any artefact that is 300 or more years old and has a 10 per cent gold or silver content, must declare it to the coroner within 14 days. About 500 such finds are reported each year.
Mr Herbert claimed that finding it with his 14-year-old metal detector was destiny. “I have this phrase that I say sometimes: ’Spirits of yesteryear take me where the coins appear’, but on that day I changed coins to gold,” he said. Here’s a link to a short video of the find:
Metal detector enthusiast unearths huge hoard of Anglo-Saxon gold
If you’ve got some gold “treasure” of your own, and don’t fancy burying it like the previous owner of this hoard did, we cover what other options you have to store gold here. Our gold storage advice also includes how to avoid metal detectors.
China keen to buy IMF gold
September 23, 2009 by admin · Leave a Comment
China is considering buying gold that the International Monetary Fund (IMF) is planning to sell. The IMF are planning to sell 403 metric tonnes of gold.
China which currently holds 1054 tons of gold (up from 400 tonnes in 2003) is keen to increase its holding in gold, and if the price is right, China would like to buy from the IMF.
The 403 tons of gold that the IMF is planning to sell is equivalent to 12,896,000 ounces of gold and at a spot price of $US993 per ounce, the gold is worth approximately 12.8 billion in US dollars or around 18.3 billion in kiwi dollars.
China is currently the biggest producer and buyer of gold. and is keen to diversify out of her 2 trillion dollars in foreign currency reserves. As you can see, China buying up this gold is a drop in the ocean when compared to her 2 trillion in paper currency reserves.
The IMF is reducing its holdings by approx one-eighth of its gold by selling 403 tons to other central banks or if needs be on the open market. This has been flagged for some time so seems unlikely to have a major impact on the price of gold, especially as it will most likely occur “off market”. The full Reuters article is here.
Weekly Wanderings 22 September 2009
As usual in these weekly musings we present you with interesting items we’ve come across during the week…
From Bill Bonner of the Daily Reckoning comes this little summary.
Let’s get this straight.
Household credit is shrinking…
Profits are shrinking…
Employment is shrinking…
Housing values are shrinking…
The wage base is shrinking…But the recession is over!
Whoa…how is that possible?
Beats me, Bill. Green shoots? More like a smothering by toxic green algae…..
———————————————————————————————————————–
The big debate of the moment in the blogosphere, and to some extent in the financial press, concerns inflation or deflation – which is winning? On our site, we take the view that inflation is an increase in the money supply and deflation is the reverse. But there are subtleties here…
The real question is whether or not we include debt in the equation…. It’s easy to see that with quantitative easing and the bailout packages, the Federal Reserve is definitely pouring money into the system. However, if we consider inflation to be an increase in the money supply plus debt, a very different picture emerges.
In the video below, in another brilliant piece with Max Keiser, Steve Keen discusses these issues. Based in Australia, Steve is one of the miniscule number of academic economists who understood the approaching dangers before they arrived, and warned a heedless world…..
Max Keiser and Stacy Herbert, in their weekly TV programme, “On the Edge” are rapidly becoming essential viewing. You can watch the video (it’s in 2 parts) but we also summarize the themes below them.
- Why are economists dangerous?
Underlying assumptions are often not sound. - Often the assumption is made that debts are always repaid.
Patently untrue. - At the beginning of his tenure at the Federal Reserve, and at several later times, Alan Greenspan “saved the economic system”, at the expense of creating ever more debt.
- The end of the road? Investment banks are creating way more debt than the amount of money the Fed is pouring in…
- The approximately $1 trillion that Bernanke has used to stimulate the economy pales into insignificance compared to the private sector debt of about $45 trillion. The bailout money is being used by the investment banks to deleverage from debt. You can see now why the bailouts have had little or no tangible effect on the economy.
- It’s interesting to compare the US situation today with Japan’s after the collapse of its bubble back in the 80’s.
- If we don’t abolish the debt, which should never have been allowed in the first place, and force the banks into bankruptcy, then we face a never-ending depression………
———————————————————————————————————-
I must admit that, in my own mind, I am uncertain….
I still recall, as I mentioned last week, a speech that Alan Greenspan, the former head of the Federal Reserve) made in Belgium during his term in office, in which he repeated 5 times: “The Federal Reserve stands ready to create money WITHOUT LIMIT…..” (Our emphasis).
There is further inflation vs deflation debate over at Financial Sense Newshour
Finally, I would like to draw your attention to an interview by Eric King over at King World News with Bill Fleckenstein of Fleckenstein Capital, which provides a view into the insights and analyses of a very smart and capable money manager.
There’s lots of other good stuff on Eric’s site as well.
Buy gold in New Zealand - Is now a good time?
September 16, 2009 by admin · Leave a Comment
With Gold having reached a weekly closing price over $1000 US for the first time in history on Friday 11 September and being less than $30 off it’s all time high, is it currently a good time to buy gold in New Zealand?
We have written in our FREE eCourse (which you can access here) how the time to buy is on dips not when the gold price is reaching or close to reaching new highs, so that would indicate that this isn’t the best time to buy gold.
But, while that might be the case in the U.S., here the New Zealand dollar gold price tells a different story. Just look at the following 1 year price chart…
1 year Spot Gold Price History in New Zealand Dollars per Ounce
Clearly, February this year was not the ideal time to be buying gold in New Zealand dollars as it topped out. This was also when the NZD reached a low against the USD as per the 1 Year Chart below:
The US Dollar generally moves inversely to the (US Dollar denominated) gold price, while the NZD - as a preferred resource currency - generally also moves inversely to the US dollar. So, the exchange rate plays a major role in the NZ dollar gold price.
The below table shows the annual percentage change in the gold price for 10 currencies during the last eight years of the current bull market in gold.
|
Annual Percentage Change in Gold Price |
||||||||||
|
|
USD |
NZD |
AUD |
CAD |
CNY |
EUR |
INR |
JPY |
CHF |
GBP |
|
2000 |
5.7% |
11.6% |
10.6% |
2.2% |
5.8% |
7.0% |
1.2% |
5.6% |
4.7% |
2.1% |
|
2001 |
2.5% |
9.1% |
11.3% |
8.8% |
2.5% |
8.1% |
5.8% |
17.4% |
5.0% |
5.4% |
|
2002 |
24.7% |
-1.0% |
13.5% |
23.7% |
24.8% |
5.9% |
24.0% |
13.0% |
3.9% |
12.7% |
|
2003 |
19.6% |
-4.5% |
-10.5% |
-2.2% |
19.5% |
-0.5% |
13.5% |
7.9% |
7.0% |
7.9% |
|
2004 |
5.2% |
-4.1% |
1.4% |
-2.0% |
5.2% |
-2.1% |
0.0% |
0.9% |
-3.0% |
-2.0% |
|
2005 |
18.2% |
24.4% |
25.6% |
14.5% |
15.2% |
35.1% |
22.8% |
35.7% |
36.2% |
31.8% |
|
2006 |
22.8% |
19.4% |
14.4% |
22.8% |
18.8% |
10.2% |
20.5% |
24.0% |
13.9% |
7.8% |
|
2007 |
31.4% |
21.5% |
18.6% |
10.4% |
23.0% |
17.9% |
17.5% |
24.7% |
21.5% |
29.2% |
|
2008 |
5.8% |
20.0% |
32.5% |
32.4% |
-1.1% |
11.9% |
30.4% |
-14.9% |
0.2% |
44.3% |
|
Average |
16.3% |
12.8% |
13.3% |
13.6% |
13.5% |
10.8% |
16.8% |
13.6% |
10.6% |
17.1% |
You can see that while there is significant volatility year to year in every currency, the overall change in the past 9 years has been very consistent. At a 13.8% increase on average per year it has also been large!
The chief point to take away from this table is that all currencies have been devalued compared to gold, and on a remarkably similar basis. Gold has gained by over 100% in almost every currency over the past decade.
So if you are a long term holder you have made good gains or rather protected your original capital well. So the question remains, is now a good time to buy gold as a New Zealander?
If we look at the longer 2 year price chart for NZ dollar gold we can see that the price is now back around where it was a year ago just prior to the panic surrounding the Lehman Brothers collapse. So overall we think this is a good time to be buying gold in New Zealand.
As we’ve already mentioned the NZD/USD exchange rate is a big factor in the NZ dollar gold price. While the “Kiwi” may still strengthen further from here, this is also the time of the year when the US dollar denominated gold price usually strengthens which could negate much of any further NZD strengthening.
2 year Spot Gold History in New Zealand Dollars per Ounce
Could the price drop further yet? Yes, as the graph shows it may yet drop back to the longer term trend line at about $1300, but we would much rather be buying gold at the current price than anything else for the last 8 months. We still believe we are in the early to middle stages of this current upwards gold price cycle. We discuss this further in an earlier article. Refer to the last 3 paragraphs here.
So, if you buy gold in New Zealand dollars now we don’t think you’ll regret this in the years to come. A minimum of 5-15% of your assets should be allocated to physical gold. We also discuss this in more detail in our Free eCourse.
NOTE: You can go to our Gold Prices page to see the very latest Silver and Gold prices in both NZ and US Dollars along with their respective gold charts. For a complete list of all our articles go to the “Sitemap”.
Weekly Wanderings 16 September 2009
September 16, 2009 by admin · Leave a Comment
As usual in these weekly musings we present you with interesting items we’ve come across during the week… The financial news is coming fast and furious at the moment… Last week gold closed at its highest weekly closing price in history….
This week we return to two commentators we have featured before in these pages, Gerald Celente of the Trends Research Institute and Max Keiser of MaxKeiser.com.
We would strongly urge you to watch the complete video interview – its only 11 minutes - with Gerald Celente. It is important to realize that Mr Celente is not some crackpot – he is Director of the Trends Research Institute, the forecasting record of which, over time, speaks authoritatively for itself.
We summarize below (the emphases are ours) the main points he makes concerning what has occurred in the financial world over the last year and what the trends are suggesting to the Institute.
- There is no economic recovery – rather, it’s a cover-up.
- The US standard of living has to suffer a further decline.
- The US has to undergo a second American revolution, or a Renaissance, with possibly the former leading to the latter. At present, the trends favour the former…
- There will be a third party formed in the US, before the end of President Obama’s first term, which Mr Celente is calling “Progressive Libertarianism”.
- If you want to get an idea of what is coming, watch the trend in the US dollar index and the price of gold…..
Now, over at MaxKeiser.com, we find the following…
Risk of deflationary collapse greater now than in 2007, Janet Tavakoli
September 14th, 2009 by Stacy HerbertStacy Summary: We’ve just interviewed Janet Tavakoli for our first episode of The Keiser Report. If you don’t know her, you should. She wrote a fantastic book, Dear Mr. Buffett. Max and I are on our second read of it. You really must get this book if you want to understand derivatives from one of the foremost experts on it who writes in plain English about how these financial tools became instruments for widespread fraud that then led to financial crisis. She also gives loads of positive advice and insight.
Here is a summary she provided for MaxKeiser.com on where she thinks we are today two years since the crisis began:
Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay.
Now, we agree in broad terms with essentially all of the above…
However, as Ben Bernanke has stated, the Federal Reserve has a technology called the printing press….. and can drop money from helicopters as required… Hence his nickname of “Helicopter Ben”, or more appropriately, “B52 Ben”….
Also we recall a speech that Alan Greenspan, the former head of the Federal Reserve made in Begium during his term in office, in which he repeated 5 times: “The Federal Reserve stands ready to create money WITHOUT LIMIT…..” (Our emphasis)
For a contrasting viewpoint to the deflation thesis, check out the comments of Bud Conrad, chief economist over at Casey Research.com, in this audio clip with Jim Puplava, of Financial Sense. (the interview starts at 1 hour and 8 minutes into the webcast).
We had the pleasure last November of attending a lunch and dinner with Bud Conrad, here in Auckland, at the invitation of a friend of ours Louis Boulanger.
On our site here we are also interested in resources in general as well as precious metals. This week we would like to draw your attention to this very interesting article on sustainability that has appeared over at The Oil Drum.
BTW, this site is an essential resource if you wish to learn about topics such as peak oil, with many experts commenting here.
The article above is written by Joseph Tainter, a Professor in the Department of Environment and Society at Utah State University, and author of the seminal work “The Collapse of Complex Societies”.
Thats all for this week - check back next week for more or if you’re really lazy go and enter your name and email address in the box to the top right now. You’ll then receive our latest articles once a week straight to your inbox.
