Prices and Charts
Gold Steady From Last Week
Not much change in gold prices from last week. In NZD dollars, it is up just $1 to $3775 but remains below our first buy zone at $3800. Currently it is backfilling the gap up that took place in early April around $3770. If it dips below that then look for $3700 as the next buy zone. Intersupport areas are noted in the chart.
While in USD gold is down $12 from last week and sitting just above support at $2300. Can it hold there again? Otherwise, we’ll see a retest of the March breakout. Around $2200 would be the first area to watch for if that happens.
Can the 50-Day MA Hold For Silver?
Meanwhile silver in NZ dollars fell 20 cents to $47.76. It now sits right on the 50-day moving average (MA). With the RSI indicator at neutral, silver could go either way from here. If the 50-day MA doesn’t hold, then the next major buy zones are $45 and $42.50.
It’s exactly the same situation in USD silver. It was down 1% from last week and right on the uptrend line. If that doesn’t hold, then layer in at $28, $26 and $25.
But once this consolidation ends even higher silver prices are likely ahead.
NZ Dollar Turns Down From Downtrend Line Again
The Kiwi once again turned lower after hitting the downtrend line dating back to 2021. It was down 34 basis points from last week to 0.6134. It is consolidating within this wedge pattern so it could head back down to the blue uptrend line around 0.5900.
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:
Continues below
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New Zealand’s Golden Reserves: Unveiling the RBNZ’s Holdings
Given what is going on with gold reserves increasing elsewhere in the world, this week, we delve into the world of New Zealand’s gold reserves, held by the Reserve Bank of New Zealand (RBNZ).
The article explores:
- The official transparency surrounding the RBNZ’s gold holdings
- How New Zealand’s gold reserves compare to other countries
- The potential motivations behind central banks holding gold
Intrigued by the role of gold in a central bank’s strategy and the reasons behind New Zealand’s specific holdings? This week’s feature article sheds light on these topics, offering valuable insights for those curious about the world of central banking and precious metals.
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Central Bank Gold Purchases Have Increased 2.5 times Since Ukraine War
Since the outbreak of the Ukraine war, the average global central bank gold purchases have increased from 118 tonnes per quarter to 291 tonnes.
Source: In Gold We Trust Report
Gold’s Share of Global Reserves Up 9% Since 2014
This increase in gold buying looks to have come at the expense of holding the US dollar as reserves. Of course, the rising gold price will also have helped increase gold’s share:
2014: USD share of global reserves = 59%; gold share of global reserves = 10%.
2023: USD share of global reserves = 49%; gold share of global reserves = 19%.
USD continues to lose share of global reserves to gold; major mean reversion trade still in early innings.
Cht via
@JanGold_
Source.
Gold Overtakes Euro in Global International Reserves
But interestingly gold reserves are now larger than Euro:
“Sturdy central bank gold buying since 2009 and a rising gold price has grown the precious metal’s share of global international reserves to the detriment of fiat currencies. By the end of 2023 gold surpassed the euro and the next fiat currency to be challenged is the US dollar.”
Source.
Central Bank Reserve Managers Survey: 15% Expect to Increase Their Gold Allocation
The OMFIF (an independent think tank for central banking, economic policy and public investment) surveyed 75 central bank reserve managers last year about their intentions for the next 12 months.
This showed gold was likely to be the second most in-demand asset behind government bonds. With 14% of reserve managers saying they intend to increase their gold reserves:
Figure 2. Traditional reserve assets in demand
Over the next 12-24 months do you expect to increase, reduce or maintain your allocation to the following assets classes? Share of respondents, %
Source.
The 2024 report is now out and the survey shows a very similar response:
“Despite a record-high gold price and easing near-term inflation fears, a similar proportion (15%) expects to do the same over the next 12-24 months. If this materialises as it did over the past year, an additional $600bn of reserves would be made up of the precious metal in the coming years.”
Source.
The OMFIF report the above chart is from, points out that it’s likely to be a steady and ongoing diversification out of the US dollar:
“Accordingly, it’s not so much de-dollarisation but gradual diversification of currency holdings that is the focus of most central banks. For the 2024 GPI report, we’ll examine whether reserve managers’ sentiment towards the dollar has soured as the global economy continues to fracture along geopolitical lines.”
Saudi Arabia Joins BRICS Cross Border CBDC
Call it USD diversification or de-dollarisation, but the trend is clearly moving away from the USD as the dominant global currency. Which brings us to some recent rumors and news from the BRICS nations:
“Today Putin talked about a new independent BRICS payment system, “free of abuse” and “political pressures”. Earlier the President of BRICS Bank, Dilma Rouseff, said how after decades of subjugation due to high interest rate loans from the IMF, this would help the Global South.”
Source.
Then there have been murmurs like this swirling around in recent weeks:
“June 2024, Saudi Arabia is expected to announce ceasing oil sales in US dollars, ending the Petrodollar Pact of June 6, 1974 (expiring June 9, 2024)
The decision not to renew this pact stems from Saudi Arabia’s recent invitation to BRICS and its move towards de-dollarization”
Source.
We are yet to see anything concrete supporting this, however, below is the fact [emphasis added is ours]:
“Today it was announced that the mBridge cross border central bank digital currency (CBDC) project has entered the minimum viable product (MVP) stage, the earliest production phase. mBridge is an initiative between the Bank for International Settlements (BIS) Innovation Hub and the central banks of China, Hong Kong, Thailand and the UAE. Additionally, the Central Bank of Saudi Arabia has become the fifth central bank member, with another 26 observers.”
Source.
This could be very significant because the creation of the “petrodollar” – in simple terms Saudi Arabia agreeing to sell oil only in dollars – has been a very major support for the dollar since the final link to gold was severed in 1971. At the very least Saudi Arabia appears to be hedging its bets between the USD and BRICS nations.
Chinese Central Bank Pauses Gold Purchases in May
As we point out in this week’s feature article above, the Chinese central bank reported that they had paused their gold purchases in May.
However, Saxobank’s Head of Commodity Strategy notes that:
“Gold comment: #Gold lost altitude after newswires reported the #PBOC after 18 months of non-stop buying paused their purchases in May. China, a major driver of the gold rally in the past year, is nowhere near done buying gold, but the pause also highlights they are humans, balking at the prospect of paying record prices. Also, the recent attention paid to Chinese private buying has likely thrust them into a spotlight they normally avoid. Overall, gold is still consolidating and the news will likely prolong that phase, but overall the long-term bullish outlook has not changed.”
Source.
2 Major Central Banks Cut Interest Rates
Finally, in the last of the central bank news for the week, the European Central Bank cut interest rates along with their Canadian counterparts. The reports were that inflation is being reigned in.
But we’d say a couple of comments on X summed this up nicely:
Paulo Macro:
2008 Trichet moment all over again but in reverse
Quoting: Julian Brigden
*LAGARDE: ECB DECIDED CUT BASED ON RELIABILITY OF PROJECTIONS ???????? OMG, and this from the transitory crowd are they serious!
Source.
The US will likely be forced to follow suit before long if these scary statistics are anything to go by:
“For the first time in history, annual interest payments on US national debt will overtake defense spending in 2024, according to the CBO.
It is projected that for the full Fiscal Year 2024 (FY 2024), interest spending will hit $900 BILLION.
In Q1 2024, interest costs hit $1 trillion on an annualized basis and were $29 billion higher than defense outlays.
In the first 7 months of FY 2024, interest was also higher than spending on Medicaid, Medicare, and Defense, at $514 billion.
Meanwhile, in 2023, interest as % of GDP was the highest in 25 years and even exceeded World War II levels.
The US government needs lower interest rates more than ever.”
Source.
To us, it looks more and more like central banks will help to unleash another (larger?) wave of inflation.
If you’re yet to have any protection via gold or silver this current consolidation is likely to be a very good time to start.
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