Prices and Charts
NZD Gold Pulls Back from $3050
Gold in New Zealand dollars is down $38 (1.25%) from a week ago. It touched $3050 during the week before pulling back sharply yesterday after some bizarrely good US jobs numbers were announced. The NZ dollar also fell sharply and so the damage to the NZD gold price has not been that severe thus far. But we could yet see NZD Gold dip lower to the 50 or 200 day moving averages or even back to the blue uptrend line. So the buy zones to watch for are $2950, $2900 and $2850.
The hit to the USD gold price was much more visible. It was down $57 (3%) for the week. But this pullback was expected given how overbought US gold had become. The sharpness of the dip has served to get the RSI overbought/oversold indicator back into neutral territory already. But we could still see USD gold dip to $1850 or even $1800. However, once a higher low is made we’d expect the wave up to continue towards $2070.
NZD Silver Down Almost 5%
As is often the case, the fall for silver was even more pronounced. Even the weaker Kiwi dollar couldn’t do much to reduce the fall as NZD silver fell almost 5%, down $1.82 to the low $35’s.
The further pullback from the multiyear downtrend line has taken silver below the 50 day moving average which since September had proven to be good support. So it could yet still dip down to the 200 day MA at $34. That would still make it a higher low and so there’s a good chance we’d see silver move back up towards the downtrend line again.
Again the USD silver fall was more pronounced, dropping 6.5% from 7 days prior. It too could dip further yet, even back to the 200 day MA around $21. Then we’d expect to see silver head back towards the downtrend line.
NZ Dollar Down 1.7%
The New Zealand dollar was down 1.7% from last week. As already noted, stronger than expected US jobs report data gave the USD a serious boost.
Analyst Steph Pomboy of MacroMavens tweeted:
“I’m still trying to gather my senses after that stunning payroll #. Are they just making this stuff up now?? The Payroll gain comports with NOTHING else we are seeing: layoffs, small biz hiring, ISM surveys, ADP, etc, etc. But here’s one answer: Part time emp +627k”
…”and here is a look at what follows when Part Time jobs outpace Full Time.”
In case you needed the explanation, we think she is referring to the recession that occurred the last 2 times part time employment jumped sharply and full time fell sharply.
So the US dollar may have a bit of a short term bounce here. Which could mean metals drop a bit and so does the NZ dollar. But our guess is that both of those soon continue their recent uptrends. Meaning USD gold and silver will rise more than NZD gold and silver. But metals in NZD will still rise.
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Should I Buy Gold or Silver in 2023? 7 Factors to Consider in Gold vs Silver
This is probably one of the most common questions we get. Should I buy gold or should I buy silver?
So this week’s feature post looks at 7 factors to take into account when deciding. These are:
1. Gold or Silver as a Crisis Hedge
4. Mark Ups or Margins Over Spot Price
6. Ability to be Borrowed Against
7. Potential Upside
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Biggest News of the Week: IMF Asks “Gold a Barbarous Relic No More?”
At the start of the year we wrote about how “2022 Was a Record Year for Central Bank Gold Purchases”.
This fact doesn’t seem to have escaped the International Monetary Fund (IMF), as they released a surprisingly titled report this week:
Gold as International Reserves: A Barbarous Relic No More?
Take our word for it that at 37 pages it is a bit of a dry read! However Ronni Stoeferle and the team at Incrementum have done an excellent summary on twitter that perfectly highlights the main points. Of which there are a few. And you’ll only lose a few minutes of your time.
If you want an even shorter version, here’s what we think are the key takeaways from this about face from the IMF who were previously very sceptical of gold:
“In the past, the IMF considered gold to be a “barbarous relic” and advocated for its replacement with a more modern and flexible reserve asset, such as its own Special Drawing Rights (SDRs). However, in recent years, the IMF has changed its stance on gold.
They now recognise the importance of gold in a diversified international reserve portfolio and the organisation now allows its member countries to hold gold as part of their official foreign exchange reserves.
“After moving slowly downward for the better part of four decades, central bank gold holdings have risen since the Global Financial Crisis.”
“Firstly, gold appeals to central bank reserve managers as a safe haven in periods of economic, financial and geopolitical volatility, when the return on alternative financial assets is low.
Secondly, the imposition of financial sanctions by the United States, United Kingdom, European Union and Japan, the main reserve-issuing economies, is associated with an increase in the share of central bank reserves held in the form of gold.
“Emerging markets increase the share of reserves held in gold in response to sanctions risk. Many of the largest year-on-year increases in individual central banks’ gold holdings occur at times when central banks think that they may be subject to financial sanctions.”
and “evidence suggests that some reserve managers respond to relative costs and returns: they increase the gold share when the expected return is high while that on financial assets, such as U.S. Treasury securities, is low. They view gold as a hedge against economic and…
…geopolitical risks: gold shares in advanced countries and emerging markets are increasing with a measure of economic uncertainty, and those in advanced economies increase in addition with a measure of geopolitical risk.”
Adam Taggart and Mike Maloney also cover the main points from Ronni’s tweet. So if you prefer to watch and listen then check that the video here.
As Ronni and the incrementum team conclude:
“What is clear is that more and more role players, including the IMF(traditionally sceptic of gold), are recognising the value of gold as a neutral, risk-off asset.”
While retail demand dropped off for gold (and silver) towards the end of 2022 and in January 2023, China certainly hasn’t slowed its purchases.
The latest numbers from China show that this central bank buying continued in January.
Peter Spina tweeted that:
“Another +480,000 golden Troy ounces added in January to official reserves.”
While James Anderson asked the question:
“Why China’s more
consistent reveal now?
3 piles of Chinese #Gold
from increasingly admitted official pile, to military mined, & opaque SWF / bank agent stacks much post ‘08GFC
#1 miner for most of 2010s while also disgorging west of unsecured gold bullion outflows (ETFs, etc)”
“Data from The People’s Bank of China shows that its #gold reserves rose by 15 tonnes in January – the third consecutive month of additions. This takes its total gold reserves to 2,025 tonnes.”
After years of making very few announcements about their gold purchases (purchases that likely continued as Anderson points out through “opaque entities”). Why are they announcing additions every month now? After staying under the radar, maybe they are happy to see the gold price head higher now?
How about you? Do you recognise gold’s value “as a neutral, risk-off asset”? Are you adding to your gold and silver reserves monthly?
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