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The Kiwi Dollar didn’t manage to stay above the 50 and 200 day moving averages (MA). This week it plunged over 3%. But now it is very oversold on the RSI and also below the lower Bollinger band, so odds favour a decent bounce higher any day now.
The falling Kiwi has held up local gold and silver prices. While the USD price of gold has fallen almost every day this week, the weaker Kiwi pushed the NZD gold price up to just touch the 200 day MA. But it has pulled back from there today. With the NZ Dollar so oversold and due to bounce, we’d expect the NZD gold price to finally pull back from here. Keep a look out for the $1700 level as a possible buy zone.
Silver has fallen more than gold. So even the much weaker Kiwi hasn’t stopped the local NZD silver price from falling this week. It wouldn’t surprise us to see silver fall further yet also.
One of the reasons given this week when gold took a tumble was Janet Yellen talking up the odds of a further hike in US interest rates. But this week Jim Rickards explained why he believes gold will still go higher even in the face of another Fed rate increase.
“There’s only a small amount of gold backing these markets. Think of an inverted pyramid, with a small amount of gold at the bottom supporting a vast amount of paper gold contracts on top.
So the paper market is not an honest reflection of the physical gold market.
And there’s no question that the paper gold market has been manipulated downwards. That’s not a conspiracy theory. I’ve spoken to expert witnesses in some of the pending litigation involving price manipulation. These are PhD statisticians who’ve looked at 20 years of data and tell me there’s no question that the paper gold market is being manipulated.
Who’s behind it, and their motivation, is a matter of some speculation. But more importantly, gold has been moving higher despite higher interest rates and price suppression through the paper gold market.
That tells me we’re seeing a flight to quality, meaning people are losing confidence in central banks all over the world. They realize the banks are out of bullets. They’ve been printing money for eight years and keeping rates close to zero or negative. But it still hasn’t worked to stimulate the economy the way they want.
So gold has been moving up in what I would consider a challenging environment of higher rates and a manipulated paper market.
…So the Fed’s raising rates in the face of a weak economy. That will become obvious and by April or May the Feds going to have to reverse course.
What’s going to happen when the Fed reverses in April or May?
Gold’s going to go higher again, because people are going to realize the Fed can’t raise rates even though they want to. They’ll have to cheapen the dollar again, and that’s very bullish for gold.
To sum it all up, I’m very impressed with the present gold action because it should be going down based on higher rates and price suppression of the paper gold market. But it’s not, it’s rising.
So I expect gold to really take off in the spring.”
On top of Rickards thoughts, there is also clear historical precedent for gold to go up when interest rates are increased by the Fed. This table care of Bullionvault clearly shows that gold rises in the months following a Fed rate hike. Particularly 3 months and 12 months later. Plus the average percentage move in the 12 months following (7.2%) is also higher than the average for all months and even after interest rate cuts.
Source. This goes against whatever you’ll hear in the mainstream about rising interest rates being bad for gold. Anyone saying this clearly doesn’t look at history. Just take the 1970’s for example where interest rates went extremely high – but so did gold. On the topic of the fed interest rate increase and the US debt ceiling, Bill Bonner had another excellent article this week.
And on the debt celing:
“The feds are running up against their debt ceiling.
There again, the sound and fury will sell newspapers. Democrats will fume. Republicans will fret. But it will be essentially meaningless agitprop.
All of the main players are firmly committed to more spending. They won’t let prudent legislation or a $20 trillion deficit stand in their way.
Here’s pseudonymous blogger Tyler Durden at Zero Hedge:
“While in recent weeks there has been a material increase in Fed balance sheet normalization chatter, according to a new report from Deutsche Bank analysts, it may all be for nothing for one simple reason: should the U.S. encounter a recession in the next several years, the most likely reaction by the Fed would be another $1 trillion in QE, delaying indefinitely any expectations for a return to a “normal” balance sheet.”
No return to “normal.” Not voluntarily. Empires don’t back up. And bubbles don’t prick themselves.”
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There have been some significant changes in the silver market this week.
No, we’re not talking about the price dropping sharply on a couple of days.
Rather, changes to how or in fact who, sets the silver price.
In the piece above by Jim Rickards, he discussed how manipulated and suppressed the paper gold market is. But, perhaps the silver market, a much smaller market, is even more so.
CME and Thomson Reuters suddenly announced their withdrawal from the setting of the LBMA (London Bullion Market Association) daily silver benchmark price this week.
We’ve written an article looking at this news, but also other developments this week in the silver market that hint that the shackles may just be getting loosened from silver at the moment.
We have an article on the website this week that details how many major nations have become net sellers of US government bonds the past 2 years. This could have implications on interest rates in the US which will also flow on worldwide. The conclusion is also reached that these central banks may turn to gold even more than they have in the years since the financial crisis.
Coincidentally Alasdair Macleod of GoldMoney also reaches a similar conclusion in an article this week:
“Most exporting nations accumulating foreign currency reserves are turning into sellers of dollars. This is either for strategic reasons, such as in the case of Russia and China, or because their commercial interests are becoming increasingly aligned with Sino-Russian trade policies. China, Russia, Japan and the Middle East are therefore all future sellers of the dollar, and of the underlying US Treasuries and T-bills in their possession. All other central banks will also be aware of these developments by now, and should be re-examining their exposures accordingly.
The coming months will almost certainly see a further deterioration of the Eurozone’s survival prospects, and an objective analysis must embrace the consequences of its demise and that of the whole euro financial system. The only way capital flight within the system can be reconciled is by a systemic collapse. That puts two major reserve currencies on the sell list of most central banks: the dollar and the euro.
Together, they are the world’s reserve currency and the currency for the world’s next largest economic area. They account for 40% of the world’s GDP, the part that represents the world of yesterday. Therefore, there is a sea-change underway in nearly all central banks attitude to gold, if only because other than the yen, yuan, sterling and the Swiss franc, what else is there?”
Central Banks have been net buyers of gold for many years now, and this move out of US treasuries and the troubles in the Eurozone indicates this won’t be changing anytime soon. The Reserve Bank of NZ still has zero gold and is unlikely to have any in the future. So why not become your own central bank and create your own gold (and silver) reserve? You can call, email or order online for a quote. There are still some of the excellently priced Gold Kiwi’s left.
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This Weeks Articles:
As always we are happy to answer any questions you have about buying gold or silver. In fact, we encourage them, as it often gives us something to write about. So if you have any get in touch.
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|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.|
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