Why Central Bankers Still Rule the World

Gold Survival Gold Article Updates

May. 8, 2014

This Week:

  • Central Bankers Still Rule the World
  • Time to Admit That Gold Peaked in 2011?

 

Just one article for you this week, but an interesting one if you’ve come across the meme that gold reached its “inflation adjusted” high in 2011 and has already peaked. See the link below for that.

 

How Have Both Monetary Metals Fared in the Past Week?

 

Interestingly overnight local prices fell less than the US gold and silver prices due to a sharply weaker NZ Dollar (more on that soon). In US dollar terms they were down about 1.35% wheres in NZ dollars just under 0.50%.

We saw it reported that this move lower was due to Putin’s comments being less confrontational. However as we’ve said before geopolitical conflict is not the main driver of the gold price, as much as the mainstream would have you believe otherwise. The current bull market has been driven by central planner monetary policy not a decade of international conflict.

Since last week gold in NZ dollars is down $9.34 per ounce or 0.62% to NZ$1492.00.

Whereas silver reversed the trend of recent months, outperforming gold and was actually up 3 cents per ounce or 0.13% to NZ$22.37.

They both pretty much did a repeat of the previous week as you can see in each chart. Gold jumped up from NZ$1500 before moving back just below it again overnight.

NZD Gold Chart

 

Silver dipped down to new lows around $22, before bouncing sharply higher also.

NZD Silver Chart

 

You can see in this longer term 5 year chart below that NZD silver still remains within the confines of the downtrend it has been in for 3 years. Although it is getting quite compressed. In April it dropped below the support line dating back from August 2010. Then overnight last Friday it dipped even lower to touch the support line from February 2010 at NZ$22.00. So the cheapest it has been in over 4 years. There is even stronger support below this at NZ$20.00 but who knows whether we will reach this.

5 Year Silver Chart

 

We’ve seen a few people grab positions in recent days – but few is the operative word. Seems most people are still on the sidelines by all accounts. Although it seems there aren’t too many sellers at these prices either. Gold in particular seems to be building a solid base around here despite what appears to be concerted efforts to send it lower.

Central Bankers Still Rule the World

 

The past day or so has been a reminder that for most that Central Bankers definitely still rule the world. RBNZ Guv Wheelers comments that it would make sense for them to intervene in currency markets if the kiwi dollar stays high while dairy prices continue to fall seem to have caused the dollar to drop lower after being on a rise for the previous few days.

NZ Dollar Chart

 

This article gives a good run down of not only his comments but also what various bank economists think they might mean.

 

Interestingly they are coming round to our way of thinking that the RBNZ rate rises might not be so steady and regular as first thought (NZ Herald: Signs of a Reserve Bank rate-rise pullback?).

And that the Reserve Bank wants to get the kiwi dollar lower before raising rates further.

The issue here is that a lower NZ dollar would translate into higher prices for everyday goods we import (as we discussed here in answer to a question from a reader: “Why would a fall in the NZ dollar be a negative?”).

So while they may not raise rates if the dollar falls and export prices remain lower, a lower dollar would in turn lead to higher prices and “inflation” (as per standard economist definition of higher prices not an inflation in the monetary supply as per Austrian Economics), which is usually why a central bank then raises interest rates – to curb inflation.

So the RBNZ could be on a hiding to nothing here, whether they realise it or not. What they do is usually the cause of another problem. For example how their record cheap interest rates have caused rises in house prices in recent years.

So: Export prices keep falling, but dollar remains high, inflation/prices will drop so they don’t raise interest rates. Or NZ dollar falls, prices rise due to more expensive imports, inflation ticks up, rates increase.

 

Unfortunately they can’t have their cake and eat it too.

Although the Labour party thinks their new fangled “Variable Savings Rate (VSR)” means they can. If you missed what this was, in a nutshell the Labour policy is that they will force everyone into Kiwisaver then raise or lower the amount everyone is forced to save depending on how the economy is performing. This would allow interest rates to stay low. i.e. If the economy heats up they take some money away by forcing everyone to save a higher percentage.

We saw the question: “What about the poor? How will taking more money off them in forced savings help if they don’t have enough to live on?”

Labours answer was along the lines of: Lower interest rates will mean lower higher purchase and car repayments.

 

You can’t make this stuff up! So the solution is to let the poor stay in debt but make the debt a bit cheaper to repay. Oh man oh man oh man.

Here’s the MD of Infometrics view on why he doesn’t like Labours VSR idea.

Interestingly he doesn’t talk about the issue above at all though. What would it actually achieve and who would it help?

Now we’re no fans of the current central bank run monetary policy system but putting more band aids on the wound won’t actually help.

Salinas PriceAn imbalanced monetary system means an imbalanced world and an imbalanced local economy (as clearly elucidated by our favourite billionaire in: The Gold Standard – Generator and Protector of Jobs).

And one reason for these imbalances is trying to control the price of money – interest rates.

Try asking someone how interest rates work sometime. Why they go up and why they go down. You’ll get something like: “The Reserve Bank raises interest rates when things get too hot to cool it down and lowers them when things slow down to crank them back up.”

Then explain how in a free market interest rates would function in the exact opposite of the way they do now.

That is, the interest rate would be naturally higher when the economy slowed down as this would encourage savings and capital formation. And poor business and poor decisions made would be punished.

Also this cycle of rising and lowering rates could likely occur over much shorter time spans than it does currently. So corrections would be short and sharp and booms would not run on endlessly one after another.

 

But Central Bankers remain in the drivers seat – for now at least.

Overnight were comments from Janet Yellen that the US economy looks great after the winter weather has passed which were also used as a reason as to why gold and silver prices backed off.

Seems people have a short memory. But if you prefer to follow the “Central Bank of You” and set up your own “Sovereign Wealth Fund” then you know here to find us.

Insurance remains cheap at the moment when most aren’t interested in buying it. But if you are get in touch.

1. Email: orders@goldsurvivalguide.co.nz

2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)

3. or Online order form with indicative pricing

 

 

Today’s Spot PricesSpot Gold
NZ $ 1492 / oz US $ 1290.88 / oz
Spot Silver
NZ $ 22.37 / ozNZ $ 719.19 / kg US $ 19.35 / ozUS $ 622.24 / kg

7 Reasons to Buy Gold & Silver via GoldSurvivalGuide

Today’s Prices to Buy

1oz NZ 99.99% pure gold bar

1oz NZ Gold Ingot
 

$1542.73

1kg NZ 99.9% pure silver bar

1 Kilo NZ Silver Bar
 

$791.11
(price is per kilo for orders of 1-4 kgs)

$783.33
(price is per kilo only for orders of 5 kgs or more)

 

 

 

 

1oz PAMP Suisse 99.99% pure gold bar

PAMP Gold

$1589.22

1kg PAMP 99.9% pure silver bar
PAMP Silver

 

 

$841.11

1oz Canadian Gold Maple 99.99% pure gold coin
Gold Maple


$1603.90
1oz Canadian Silver Maple 99.99% pure silver coin (Minimum order size tube of 25 coins)



Silver Maple



Silver Box

Tube of 25 $707.25Box of 500 $13310

(Fully insured and delivered)

 

 


 

 


Note:
– Prices are excluding delivery
– 1 Troy ounce = 31.1 grams
– 1 Kg = 32.15 Troy ounces
– Request special pricing for larger orders such as monster box of Canadian maple silver coins
– Lower pricing for local gold orders of 10 to 29ozs and best pricing for 30 ozs or more.
– Foreign currency options available so you can purchase from USD, AUD, EURO, GBP
Note: Your funds are deposited into our suppliers bank account only. We receive a finders fee direct from them only.




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Our Mission
1.
To demystify the concept of protecting and increasing ones wealth
through owning gold and silver in the current turbulent economic
environment.

2. To simplify the process of purchasing physical gold and silver bullion in NZ – particularly for first time buyers.

 

We look forward to hearing from you soon.

Have a golden week!


David (and Glenn)
GoldSurvivalGuide.co.nz
Ph: 0800 888 465
From outside NZ: +64 9 281 3898
email: orders@goldsurvivalguide.co.nz


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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.

 

Copyright © 2013 Gold Survival Guide.
All Rights Reserved.

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