Prices and Charts
Gold and Silver Finally Correcting – Near Bottoming?
Since a week ago NZD gold is down $40 per ounce or 1.72%. The coming correction we talked about then looks to have arrived.
However it may be close to being over already too.
The gold price in NZ Dollars sits midway between the 50 and 200 day moving averages. The RSI overbought/oversold indicator is now into the 30’s (below 30 indicates oversold).
We could yet see the price dip lower to test the 200 day MA at $1850. But that is not much lower than here. So right now is probably a very good entry point.
Just consider keeping some cash in reserve in case there is a further pullback yet. But we’re wondering if that is perhaps not so likely.
NZD silver fell even further than gold. Down just over 3.5% on last week. Silver too is close to oversold. But unlike gold silver is already below the key 200 day moving average line. We’d guess there is not too much downside for anyone buying right now.
The Kiwi dollar remains stuck in its sideways consolidation. Although for the last few weeks the trading range looks to have narrowed to between 0.86 and 0.69. For now the dollar seems to be looking for a good reason to go higher or lower. So the consolidation continues until it finds one.
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:
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Why Buffett is (Still) Wrong About Gold – But How He Loves Silver
Warren Buffett recently had more comments on gold in his annual Berkshire Hathaway shareholders letter.
In short he reckons avoid it completely.
So we put together a bit of a rebuttal for Buffett.
You’ll see the 4 mistakes Buffett makes with his opinion on gold.
But also you’ll discover what Buffett thinks of silver, why he bought it previously and whether he’ll buy silver again in the future.
Is There a Kiwisaver Gold Fund or Gold Investment Option?
If you’re looking to get some exposure to gold in your Kiwisaver we’ve updated this as we didn’t have the fee structures correct.
You’ll also see why a gold “investment” in Kiwisaver is not at all the same as physical golditself.
Your Questions Wanted
Remember, if you’ve got a specific question, be sure to send it in to be in the running for a 1oz silver coin.
How Do You Value Gold – What Price Could GoldReach?
How high could the gold price go?
There are a number of methodologies you could use to try and work this out.
In this post we look at a couple of them. Surprisingly they arrive at quite similar numbers. Numbers that are more than a dollar or two higher than the current gold price.
We also look at what the NZ dollar gold price could reach. As all these calculations we’ve seen only look at gold in US dollars.
Investing in an “Infinite Q.E.” World
We commented last week that perhaps the US Federal Reserve had stopped it’s Quantitative Tightening already. That is, had the US central bank stopped reducing the massive balance sheet it built up in the aftermath of the financial crisis?
The latest numbers show this isn’t quite the case, as the Fed did reduce its balance sheet further last month.
But this doesn’t change the fact that the Fed seems to have backtracked sharply on what they were saying last year.
As John Mauldin recently pointed out:
“Following Fed policy has been whiplash-inducing over the last year. It was just two months ago that Jerome Powell set off a market panic by suggesting the FOMC [Federal Open Market Committee] would do what it thinks is right and let asset prices go where they may. They were promising at least two if not three more rate hikes in 2019. The stock market fell out of bed.
Fast-forward to now and it seems the market won and got the “Powell Put” it wanted. The Fed has given up its tightening dreams and might even loosen policy. It is even (gasp!) losing its fear of inflation.
Nassim Taleb in his book Antifragile argues that preventing small “crises” from happening on a regular basis eventually causes a very large crisis. It’s analogous to not allowing small forest fires to clear out undergrowth. Eventually you get one very large fire which is far more destructive. The Fed assuming a “third mandate” to protect asset prices is similarly dangerous.”
Satyajit Das (who we’ve featured in these pages a number of times before), had an excellent article on Bloomberg this week on this very topic. He explains why relying on central banks for growth is a very bad idea.
“Just since December 2018, central banks have collectively injected as much as $500 billion of liquidity to stabilize economic conditions. The U.S. Federal Reserve has put interest rate increases on hold and is contemplating a halt to its balance-sheet reduction plan. Other central banks have taken similar actions, fueling a new phase of the “everything bubble” as markets careen from December’s indiscriminate selling to January’s indiscriminate buying.
…Central banks’ new activism looks like a panicked capitulation to markets and political pressure. This encourages market participants to expect intervention regularly to prop up asset prices and smooth out volatility. Ultimately, this reduces the effectiveness of lower rates and additional liquidity infusions. As with any addiction, increasing doses become necessary. That will increase the strains on central bank balance sheets and tools, undermining their ability to respond in a real crisis.
Printing money was always going to be easier than withdrawing it later. In effect, central banks are boxed into a situation where they can’t normalize policy and must maintain low rates and abundant liquidity, lest they destabilize fragile asset markets and spur low growth and disinflation. This state of “infinite QE” risks miscalculations and major policy errors. If central banks are, as is now fashionable to state, the only game in town, then the game is lost.”
Where to Put Your Money in a QE World
So where do you put your money in this state of “infinite QE”. Nick Hubble of Daily Reckoning reckons:
“First things first: Don’t rely on central bankers getting things right. As you read this, an impressive housing bubble is inflating in Germany and the Netherlands. Those economies are the Spain and Ireland of 2005. Eventually, the bubble bursts. But that could take time.
Instead of relying on central bank policies, play them and their unintended consequences. Buy a German house, invest in stocks and don’t expect a financial crisis anytime soon.
With another portion of your capital, opt out. Central bankers can’t manipulate and control everything. Some assets are non-financial.
Gold is the asset that outperforms during artificially loose monetary policy — which is what we’re in for indefinitely. And it’s the asset you want to own during a banking crisis, too. Because it’s not part of the financial system.
One last thing. There is one place in the world where central bankers can’t paper over problems for long. The ECB’s powers are limited, unlike other central banks. So that’s where the next true crisis will come from. It’s the lack of a rescue that’ll be devastating, not the outbreak of a crisis.”
He makes an excellent point. You don’t have to pick when the next crisis will hit. Simply choose a portion of your wealth to put into gold (and silver). Then forgot about it and continue investing in other assets.
If you need to add to or start your store of wealth then please get in touch.
- Email: email@example.com
- Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
- or Shop Online with indicative pricing
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