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Gold – Once Again Best Friend in a Bear Market

Posted on by Glenn Thomas
11
Mar

Prices and Charts

Change from last weeks gold and silver prices
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Carnage in the Markets – Except… For Gold

Yesterday saw the worst fall for US markets since the 1987 crash. As the Daily Reckoning reported:

“Both S&P and Dow Jones went along, 5% down through noon. The remainder of the afternoon worked little improvement.

The Dow Jones tumbled 8% at one point this afternoon — the most since another Monday, long distant — “Black Monday” in 1987.

It closed the day down 7.79% to 23,851, a 2,014-point waylaying.

The S&P gave back 226 points on the day, for a 7.60% loss.

The Nasdaq similarly absorbed a 625-point trouncing, losing 7.29% on the day.

Thus the three major averages presently camp upon the doorstep of a bear market. One more slip… and they go in.

A bear market is a 20% plunging from recent peaks.

European stocks officially crossed over today — down over 22%. Not three weeks ago they traded at record heights.

Meantime, 10-year Treasury yields plunged to a starvation-level 0.318% this morning.
Words fail us.”

Today markets have bounced back.

Gold held up remarkably well throughout all this. It’s up over 1% this past week, despite some volatility.

NZD gold set a new all time high – a little under $2700. Today it has pulled back a little and as we write is at $2653.

NZ Dollar Gold Chart

The longer term chart below shows a clear break above the uptrend line. The price has so far dipped down to touch that a couple of times and held up well. Gold is looking strong and is not overbought currently either (indicated by RSI being below 70).

Buying any dips looks like the way to go at the moment. Odds are the all time high in US Dollars will be broken much quicker than most people would have considered possible.

NZ Dollar Gold Chart

Silver Lagging Gold – Still

Silver again has followed other markets more so than gold. This week NZD silver again dipped to touch the 200 day moving average (MA) and rising trend line. But then has bounced back towards the 50 day MA.

Silver is still doing better than the stock market and remains in an uptrend from mid 2019.

Also a bullish pennant looks to be forming.

NZ Dollar Silver Chart

It’s just a matter of patience (alot!) with silver. It will play catch up with gold at some point. And it will likely do it with speed.

Unlike gold, which is making new highs in many currencies every week, silver has a huge upside just to get back to the highs of 2011. See the chart below…

NZ Dollar Silver Chart

NZ Dollar Steady – Kind of – Well Not Really

The New Zealand dollar is not much changed from a week ago. So looks steady.

However intraday there was a huge swing yesterday where the price moved from as low as 0.6050 to as high as 0.6450. 4 cents is a huge move for a currency in 24 hours!

But then it moved back down to levels it was previously at. The chart below doesn’t show any of that move. So belies the fact that the Dollar has been hugely volatile too. More on that in this weeks feature article below.

NZ Dollar Chart

Need Help Understanding the Charts?

Check out this post if any of the terms we use when discussing the gold, silver and NZ Dollar charts are unknown to you:

Gold and Silver Technical Analysis: The Ultimate Beginners Guide

Continues below

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NZ Dollar Falls – Why Has the NZ Dollar Weakened and Where to Now?

With all the action in other markets, the NZ dollar has not had too much attention. That could be a mistake as it is hovering dangerously close to support lines. Where to from here?

See this week’s feature article for more…

NZ Dollar Falls – Why Has the NZ Dollar Weakened and Where to Now?

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Gold – Once Again Best Friend in a Bear Market

We’ve spilt much digital ink writing about gold’s role as financial insurance.

But the proof is in the action currently. And in gold’s past performance.

The Daily Cut shows us gold’s returns after the serious stock market meltdown in 2008:

Gold-after-2008-crisis

“Gold sold off a bit at first. Then, it rallied 166% to a peak of $1,900 an ounce in September 2011.

Something similar just happened to gold again…

Now, take a look at this next chart…

Gold-returns-since-coronavirus-panic

Since the coronavirus panic first hit the front pages in the U.S. on January 8, gold is up 7.7%.

That compares with a 15.6% loss for the S&P 500.

That means you could’ve done nearly 22% better in gold than in stocks.

But as you can see, it wasn’t a straight shot higher for gold. It dipped first. Then, it recovered and went higher.

And I expect gold will keep moving in the opposite direction of stocks.”

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Silver Also your Friend – But Just a Bit Slower to “Come to Your Aid”

If you’re frustrated with silver it’s worth also casting our eye back to the aftermath of 2008.

The chart below shows silver fell during 2008 (Black/red line). Much like gold (gold line) but further in percentage terms. But also like gold, silver bounced back and then some.

This time around silver hasn’t risen all that much in the lead up to the crash. So perhaps that’s why it is holding up better this time too?

Gold-and-silver-in-2008

What Caused the Stock Market to Plummet?

The Daily Reckoning reports:

“Oil is the explanation most widely on offer. Investors Business Daily:

Oil prices began to collapse on Saturday as negotiations between Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, and Russia over production quotas failed. The breakdown in talks led the Saudis to sharply slash prices in the onset of another price war. The Saudis also said they would abandon OPEC’s current production curb, a move that opens the same door to other OPEC members, threatening to flood the already-oversupplied oil market with possibly more than 3 million barrels per day in additional production.

Oil prices had already sold off for three straight weeks, losing more than 37% as global markets grappled with the potential impact upon demand of the coronavirus outbreak begun late last year in China.

Crude oil hemorrhaged 25% today — its heaviest rout since 1991. It has come all the way down to $30.93. And oil stocks took a savaging today.”

Laissez Faire Today points out this fall in oil could have significant ramifications:

“Last week,” says Graham Summers, “the odds of a crisis hitting the U.S. were actually quite low. Not anymore. The U.S. corporate bond market is $10 trillion in size. Some $1.5 TRILLION of this is junk… meaning any economic hiccup could result in default.
“Put simply,” Graham goes on, “up until this weekend, the market was collapsing due to fears of a possible economic fallout due to the coronavirus. Today, the market is collapsing because the oil collapse could trigger a MAJOR CREDIT EVENT similar to 2008.
This is Subprime 2.0, says Graham: “the riskiest debt in a market saturated in debt.”
A massive chunk of this debt is U.S. shale energy bonds.
Graham:
“The weekend collapse in oil prices could easily begin to trigger defaults in this space, which in turn would bring the entire junk bond market under duress.

“To make matters worse, there is another $2.8 trillion in corporate bonds are only slightly higher than Junk. These are bonds that are considered ‘high quality’ but in reality, are probably junk as well. And a significant downturn could lead to major defaults here as well.”

What Happens Next?

Back to the Daily Reckoning for some, well,  reckoning…

“…And like a blunderbuss artillery man who squanders his ammunition ahead of the main action… the Federal Reserve is blasting its remaining “dry powder” ahead of time.

As we razzed last week:

The Federal Reserve will be reduced to scraping powder off the floor. If recession swept in tomorrow… it could scarcely fire off a cannon.

Monetary policy is a spent cartridge, an empty shell casing.

Central banks will be forced ultimately to surrender command to the fiscal authorities.

Prepare for Fiscal Policy

“Helicopter money,” Modern Monetary Theory, some variant of the two, these we will see.
Depend on it.

We opened today’s reckoning with a lament from analyst Sven Henrich:

“We’re faced with the most critical time since the financial crisis.”

And so we conclude with Mr. Henrich:

The constant subsidy of markets and the economy has led us to the largest credit and asset bubble in our lifetimes and the architects of the monstrosity have left themselves weak and depleted. They are now begging for fiscal stimulus from governments that are traditionally slow to react. The big bazookas will come, the question is whether it will be too late.

That is our question as well.”

RBNZ Preparations Continue for Negative Interest Rates, Money Printing and More

These “unconventional tools” look likely to be heading down under too.

The RBNZ yesterday released its “Principles for Using Unconventional Monetary Policy in New Zealand”.

This was pre planned but now seems quite timely given the carnage yesterday!

The tools discussed include all the usual central bank favourites such as:

  • Forward guidance
  • Negative interest rates
  • Interest rate swaps
  • Large Scale Asset Purchases
  • Foreign asset purchases

We’ll have more detail on this next week. We’ve been warning about this since May 2018.  But what may have once looked a faint possibility, now looks like a matter of exactly when – not if.

Especially when we see bank economists are “forecasting a whopper 50-basis point OCR cut at the RBNZ’s next scheduled review on March 25.”

Along with a recession being “probable” in NZ.

Source.

With an entire world economy slowing dramatically all at once, now’s the time to get your insurance in place.

Grab one of the deals we have going today.

  1. 1oz Gold Maple Coins
  2. 100 oz Cast Silver Bars (serial numbered)
  3. 10 oz NTR (Texas) Minted Silver Bars

These are all selling for close to local bar prices. So quite a steal that won’t last long. Get in touch for a quote today.

  1. Email: orders@goldsurvivalguide.co.nz
  2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
  3. or Shop Online with indicative pricing

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This Weeks Articles:

NZ Dollar Falls – Why Has the NZ Dollar Weakened and Where to Now?

Tue, 10 Mar 2020 5:30 PM NZST

NZ Dollar Falls - Why and Where to Now_The New Zealand Dollar has been falling since the start of the year. But at the end of February it dropped sharply. This was likely due to the expectation that New Zealand would be more seriously impacted by the Coronavirus outbreak than markets had previously been expecting. The New Zealand dollar plummeted briefly below 0.6200 […]

The post NZ Dollar Falls – Why Has the NZ Dollar Weakened and Where to Now? appeared first on Gold Survival Guide.

Read More…

Huh? Central Banks Fighting the Virus. While the World Health Organisation Talks Up the Markets!

Wed, 4 Mar 2020 12:23 PM NZST

Prices and Charts Looking to sell your gold and silver? Visit this page for more information Buying Back 1oz NZ Gold 9999 Purity $2525 Buying Back 1kg NZ Silver 999 Purity $837 Mega Volatility This Week Volatility has been the operative word this week in most markets. We have seen huge swings up and down […]

The post Huh? Central Banks Fighting the Virus. While the World Health Organisation Talks Up the Markets! appeared first on Gold Survival Guide.

Read More…

What Type of Gold Bar Should I Buy? The 2020 Ultimate Guide

Wed, 4 Mar 2020 10:03 AM NZST

What type of Gold Bar to BuyHere’s everything you need to know when you’re thinking of buying a gold bar in 2020. You’ll learn: When to choose gold bars over gold coins What size gold bar to buy Pros and cons of different bar sizes How you can borrow against 1kg gold bars What’s the most commonly purchased gold bar size […]

The post What Type of Gold Bar Should I Buy? The 2020 Ultimate Guide appeared first on Gold Survival Guide.

Read More…

CoronaVirus Spreads Into Italy – Sharemarkets Plunge

Wed, 26 Feb 2020 12:26 PM NZST

Prices and Charts Looking to sell your gold and silver? Visit this page for more information Buying Back 1oz NZ Gold 9999 Purity $2502 Buying Back 1kg NZ Silver 999 Purity $876 NZD Gold Up 3% to (Another) New All Time High After setting a new all time high just above $2500 last week, NZD […]

The post CoronaVirus Spreads Into Italy – Sharemarkets Plunge appeared first on Gold Survival Guide.

Read More…
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.

  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
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1oz Canadian Gold Maple 99.99% pure gold coin (2020)
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Have a golden week!

David (and Glenn)
GoldSurvivalGuide.co.nz
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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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