It’s been a double whammy for precious metals over the past 2 weeks here in New Zealand. Unless you’d been asleep under a rock you’ll have noticed the prices of both metals have been rising. But over the past month we’ve also seen the NZD/USD cross rate drop from 82 cents to today just under 79.5 cents.
So a complete change in trend to what we’ve experienced for the past few months, where moves in the precious metals were being nullified by corresponding rises in the kiwi dollar. This has magnified the gains here. Take a look…
Gold in USD is up 4.5% in the past 30 days while in NZD it’s up over 8%.
Silver has had even bigger gains over this period. In USD it’s up 12.5% while in NZ dollars it has flown and is up 18.3%.
We should see them take a breath here, with the both metals (but silver in particular), in overbought territory on the daily charts (See the red circles top right).
However the interesting thing is that on a weekly chart (see below) neither metal is overbought so we could still see them go higher yet. Also for gold in NZD the next major resistance is not until $2175. For silver it’s not until $45 per ounce. So there is an argument for there being room to run yet.
Also the commitment of traders (COT) data from the futures markets are showing what is referred to as “speculative money” now flowing into the metals. These are hedge funds and the like who are more momentum players. They jump on board once they see the price moving.
Over at King World News Dan Norcini noted this development in the COT:
“The COT is a good reflection of what we saw on the price side, Eric. In both metals (gold and silver) you had a huge influx of speculative money, whether it’s hedge fund money, large reportable (entities) such as CTA’s, commodity pool operators, large private traders, and then the public.
They were all in there buying with a passion this week, while the usual suspects, the bullion banks and some of the swap dealers were all selling. We’ve got speculative money coming into these markets in a big way, and we’ve got big, commercial related selling, but that’s been the course of these markets over the course of the last 10, 11, 12 years.
Speculators are buying, but that’s what takes these markets higher. We’ve been lacking that speculative inflow. You and I have talked about that in some of our recent reports here, where we’ve discussed the sideways action in these metals, and how we’ve had a slow bleed-down in speculative interest.
That all changed when you took those resistance levels out on the charts. Now you’ve got all of that money coming back in, and that’s what’s being picked up on those COT reports right now, Eric. I would expect that to continue as long as these markets trend higher because that’s what’s going to be driving them is the return of the speculator.”
So we are seeing an about face from what we reported on at the start of August where these “managed money” players were actually very short the silver market. As pointed out a month ago, these guys being short big time back then was indeed an indicator of a bottom in silver. Has the next leg up now started? Plenty of the big names who feature regularly on King World News seem to think so.
A couple weeks back we posted a video that was a bit controversial amongst the “hard money” crowd. The result of the appearance on the Max Keiser show was that the interviewee Sandeep Jaitly subsequently resigned from the Gold Standard Institute. We’ve had a bit to do with The Gold Standard Institute as it was founded in Australia and we’ve rubbed shoulders with the founders and learnt many a thing from them.
This got us thinking about the phrase ‘Gold Standard” and how it is much misunderstood and maligned. Also with the US Republican party now talking up a new Gold Commission to relook at the dollar and how it is structured, it has garnered some attention lately.
Anyway, we found a useful infographic that summarises the various global exchange rate systems of the past 200 years, and jotted down some thoughts to share with you on our preference for a monetary system, for this weeks feature article:
In case you missed it Bernanke’s speech on Saturday NZ time said just enough to point to more money printing in the not too distant future, without actually saying when. His waffle has helped to continue the precious metals march higher since. A timely read then is why “Your window to buy gold below $1700US is closing”. This looks at historically how long it has taken to break through and stay above the previous high for gold. And why “the remaining time to buy gold under $1,700 will likely be measured in days or weeks, not months.”
But speaking of “The Bernank”, wise and wealthy investor Jim Rogers believes the Fed is probably already printing money.
“I do not know if they will announce it. I know they are going to print more money. They already are,” Rogers told India’s Economic Times.
“If you look at their balance sheets, you will see that something is happening, assets are building on their balance sheets and they are not coming from the tooth fairy,” said Rogers, who co-founded the Quantum Fund with George Soros.
“I do not know whether they will announce it or not. They are a little bit embarrassed because they announced QE1 and QE2, and it did not work. So they may try to discuss it,” Rogers said.
“They may just continue to do it without getting egg on their face again, but they are going to print money, they are all going to print money. It is the wrong thing to do, but that is all they know to do.”
Rogers also told Britain’s The Daily Telegraph: “They probably have learned how to do things off balance sheet. I have nothing to confirm this but everyone else has learned how, so they probably have too. This is just a comment on human nature.”
You can also see the video interview below too.
Another writer Toby Connor of Goldscents also had similar thoughts today:
“Another odd development is the action in bonds. A month and a half ago the bond market started to discount the inflationary surge as commodities launched out of their three year cycle low. Mysteriously, two weeks ago, interest rates started to tank.
One has to ask themselves, who in their right mind would be buying bonds with a negative yield in a rapidly accelerating inflationary environment?
This sudden reversal in interest rates is another warning bell, in my opinion, that QE3 may have already begun, and Bernanke is already buying bonds in the attempt to hold interest rates under 2%.”
The accompanying chart showed US 10 year treasury yields falling sharply. Remember Interest rates fall when bonds prices rise. And bond prices rise because more people are buying than selling them. So maybe it is the mysterious hand of “The Bernank” at play already buying bonds when it doesn’t make sense?
We also have one other article on the site this week, an interview with Doug Casey. We always enjoy hearing from Doug as he’s not afraid to call a spade a spade. He reckons we’re getting closer to the “Day of Economic Reckoning”.
As always the links to this weeks article along with intro excerpts are at the end of this email.
With the fast run up people will be asking themselves if it’s too late to get on board now? Well, you could see a fall in the shorter term, but in the long run odds are you’ll be right around these levels.
But after a rise of 12.5% in a month in US dollars how much upside is left?
Well, we received a short interview in our inbox over the weekend, by the Daily Crux with Matt Badiali, also on the Commitment of Traders data. He also referred to a recent buy signal that has only been tripped 5 times in the past 10 years. Badiali explains the signal:
“Whenever the net position of non-commercial traders has fallen below a certain level – 11,000 contracts, to be specific – silver has soared.
When this signal flashed in 2003, silver rallied 85% in a year. The next signal in 2005 resulted in a gain of 113%. The third in 2007 sent silver up 76% in about six months. And in 2009, it kicked off a two-year, 407% rally.”
So if this signal is correct for the 5th time in a decade we could be seeing gains of a minimum of 76%. So it would seem that a 12% gain could just be the start of a much bigger run higher. As always our preference is to buy in tranches and keep some cash in reserves. But if you want to get a tranche here then get in contact…
1. Email: email@example.com
2. Phone: 0800 888 GOLD ( 0800 888 465 )
Have a golden week!
This Weeks Articles:
Trouble Brewing in Australia. How Will This Affect NZ?
This Week: What’s Next for Gold and Silver in New Zealand Dollars? Learn Directly from Doug Casey for Free Trouble Brewing in Australia. How Will This Affect NZ? What’s Next for Gold and Silver in New Zealand Dollars? Well, big moves over the past week in both gold and silver in both US and NZ […] read more…
Your Window to Buy Gold Below $1,700 Is Closing
It’s Saturday morning NZ time and Bernanke has just given his much anticipated “Jackson Hole” speech. While Bernanke didn’t actually announce further money printing, gold has actually risen strongly, as he indicated it would not be far off. So the title of this article looks quite prescient, with gold getting very close to $1700US per ounce today […] read more…
Doug Casey Predicts Day of Economic Reckoning Is Near
Insightful as always is Doug Casey. Today we have an interview where he runs through a good number of topics from Europe to inflation versus deflation just to name a few… It is a deal with the devil: governments churn out more and more cash for the promise of continued prosperity. But the day of […] read more…
The Gold Standard: What Do We Think About it?
We posted a somewhat controversial video a couple weeks back of Sandeep Jaitly commenting on what in his opinion were mistakes made by Austrian School economist Von Mises on the Max Keiser show. He made a number of other comments, the upshot of which was that he resigned from the Gold Standard Institute. We’ve since […] read more…
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.