Prices have not moved too much from last week – as always you can see them over to the right.
So we don’t have too much to report on them. Instead this weeks email is a currency wars special with comments from across the globe on the Reserve Bank of New Zealand’s recent intervention into the FOREX markets to dull the kiwi’s rise. (In case you missed that here’s what we wrote about it a few weeks ago).
So first up, check out this weeks feature article/video where we have comments from the Washington Post and then Max Keiser in London also discussing the recent RBNZ intervention. This acted as the lead in to Keiser’s interview with Currency War author Jim Rickards. We also summarise the Rickards Interview in the article.
Our other article on the website this week may be of interest to anyone looking to slightly diversify their precious metals holdings into what is know as the PGMs. (Platinum Group Metals). To be honest it’s not our area of expertise but this article makes a good case for why their might be some decent upside ahead for Platinum and Palladium:
Anyway Back to the Currency Wars Topic
This week we noticed a local news report showing it’s not just the Greens favouring money printing here in New Zealand. Economist Ganesh Nana from the private consultancy firm Business and Economic Research Limited (BERL), called for the RBNZ to intervene for as long as necessary to bring the dollar down and to do this via money printing if required.
“Asked if New Zealand had the resources to do this, Nana replied, “It’s called a printing press. I’m not kidding,” he said to laughter.
“You can afford it. The Government has the legal right to print as much dollars as it likes.”
It would be different from propping up an exchange rate, which ran the risk of bad losses.
“Seriously, it is paper. I can’t understand why people get worried about this.” Source.
But in case you were in any doubt about the downsides of competitive devaluation, as it really is not as simple as Mr Nana would have us believe, then you should read this well reasoned piece by ex-banker Satyajit Das (who we have featured previously in: Writer Satyajit Das on How New Zealand will Fare in the Crisis)
Das discusses the impacts for Australia and also New Zealand gets a mention care of Finance Minister Billy English. It’s not too long and worth a read: Currency Wars and Economic Battles
You’ve also no doubt heard about the Kiwi strengthening against the Aussie dollar, hitting highs this week. Being our major trading partner this is likely to have negative consequences. So we imagine the calls for more Forex intervention will grow louder in the coming months. As we said a few weeks back, it may be New Zealand is one of the last men standing so to speak. Or perhaps more correctly, one of the last to fall.
In a Similar Boat to New Zealand is Israel
Like here Israel has had a buoyant housing market and rising currency. This week they had a surprise 2nd interest rate cut by their central bank aiming to weaken the Israeli currency the Shekel.
As this article points out Israel’s central bank is “trying to control a bubble with one hand while stoking the fire with the other.” As while they are lowering rates in a bid to drop their exchange rate, they have also instigated a 25% minimum deposit for first home buyers hoping to stop housing price rises. Coincidentally similar measures have been discussed here of late too. So could we yet see further rate cuts here, even though most banks economists think we will see a rates rise next year?
Currency Wars May Not Be What Drives Gold Higher
As a bit of a counterbalance to all this talk of currency wars, competitive devaluations and money printing, this week we read a quite different article.
With the recent murmuring of the Fed possibly looking at easing back on its currency printing (about which we still have serious doubts that this is coming anytime soon), this piece gives a thought provoking perspective on why this may not matter for gold. It outlines why money printing and currency devaluations may not be what takes gold higher from here. Hint – Think monetary system breakdown.
Daily Bell: “Neo Nazi Social Credit Strikes in New Zealand”
Speaking of New Zealand making the international news, the Daily Bell this week featured the Hamilton City Council’s new “living wage” policy under the bold headline “Neo Nazi Social Credit Strikes in New Zealand”.
This interesting piece comments why policies such as these are perhaps far more dangerous than just the surface risk of possible increases in rates. (although note to Auckland readers the Auckland Council is looking into a similar policy)
Objective Versus Subjective Contrarian Signals
Our article of last week indicated we thought there may be more downside yet for precious metals, but we can find plenty or reasons why they might rise also – especially in the short term.
Objective Contrarian Signals
The main objective signals we can find come from the gold futures markets Commitment of Traders report.
The below 2 charts come from Alasdair Macloed’s Goldmoney Weekly Wrap-Up this past weekend.
First up are the net positions of the 4 largest traders which are assumed to be the bullion banks such as HSBC, JP Morgan et al. They are now net long for the first time as far as records go back. So they have managed to extricate themselves from the short side and will be exposed to any upside move from here.
Conversely the managed money a.k.a. speculators, hedge funds etc have the largest short position for as far back as data goes.
Why does this matter. Well this has historically been a real contrarian signal as at extremes these guys are just about always wrong. The small chart below shows how the previous times this position has breached 40,000 contracts gold has headed sharply higher.
Subjective Contrarian Signals
The fact that we have been feeling a bit uninspired of late when trying to figure out what to write about each week is a subjective indicator.
We read much the same thing from Australian Money Morning writer Dr Alex Cowie yesterday discussing his own lack of desire to talk about gold while out with mates and how a friend of his thought that was a contrarian indicator! He also outlined many of the sentiment indicators currently reading at record lows.
Another anecdotal contrarian indicator is the fact that we have seen very little buying over the last week or so at what are prices not that far off the lows of April. In the past we’ve noticed this lack of buying often occurred at or close to lows.
So if you like the look of some of these contrarian indicators and would like to get a tranche of gold or silver, get in touch:
1. Email: email@example.com
2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
3. or Online order form with indicative pricing
Have a golden week!
Glenn (and David)
Ph: 0800 888 465
From outside NZ: +64 9 281 3898
This Weeks Articles:
|Gold Silver Ratio: Silver Ready to Rise Versus Gold?|
Gold Survival Gold Article Updates: May 22, 2013 This Week: NZ Dollar Gold and Silver: Update After the Fall Gold Silver ratio: Silver ready to rise versus gold? In case you missed it Monday morning saw a sharp fall for gold but more especially for silver. This prompted us to yesterday take an updated […]
|New Zealand Opens New Front in Currency War|
Little old New Zealand made international news in the past week or so, with word of the intervention in foreign exchange markets by the Reserve Bank of New Zealand being reported in the likes of the Washington post. The Post ran an article headed “In global currency war, a new front opens in the South […] read more…
|Platinum and Palladium: A Fundamental Shift|
Personally we haven’t followed the platinum and palladium markets anywhere near as closely as the gold and silver markets. However in this piece Jeff Clarke makes a good argument for holding some as part of a diversification strategy. We do have local suppliers with Platinum available, so if after you’ve read on, you’re interested, get in […]
The Legal stuff – Disclaimer:
We are not financial advisors, accountants or lawyers. Any information we provide is not intended as investment or financial advice. It is merely information based upon our own experiences. The information we discuss is of a general nature and should merely be used as a place to start your own research and you definitely should conduct your own due diligence. You should seek professional investment or financial advice before making any decisions.