Why gold is not in a bubble

Gold and silver in NZD

No major moves in the NZD prices of precious metals this past week.  The charts don’t look that dissimilar to a week ago – both gold and silver have eeked up slightly on where they were.

Silver is still well under it’s 200 day moving average which in our opinion likely makes it a pretty good buy at the moment – although it doesn’t take a genius to work that out in comparison to where it was a few months ago!

Gold meanwhile is tracking it’s 50 day moving average pretty closely and is still some way off touching it’s 200 day MA.

(If you want to learn a bit more about these terms then have a look at this video we put together earlier this year https://goldsurvivalguide.co.nz/gold-and-silver-new-zealand-a-beginners-guide-to-technical-analysis/)

News of the week

News of the week was that the Bank of England (BoE) increased it’s money printing programme by 75 billion pounds on the back of it’s Governor Mervyn King saying the move was a response to what may be the worst financial crisis ever.

He’s probably right there although he has to say that to justify the move.  As usual it’s the exact opposite of what’s required though.  The question is how long will we wait until Bubbly Ben and the Fed launch another round of US printing?

Who knows?  It could be quite some time yet but we reckon it’s just about guaranteed.

Or will the European Central Bank beat them to it with yet another announcement of how they intend to “solve” the euro worries.  Frankly we are getting bored with the European crisis – wake us up when the brown stuff really hits the fan please.  Until then we think we’ll tune out the politicians for a while.

Speaking of Poli’s ours are rather optimistic too we reckon at the moment.  The budget deficit is surprise surprise bigger than forecast – according to Bloomberg “The deficit widened to a record NZ$18.4 billion in the year through June, from a NZ$16.7 billion estimate in the May budget, according to government financial statements released today in Wellington… Prime Minister John Key’s government expects to return the budget to surplus by fiscal 2015 by reducing spending and encouraging growth and job creation.”They expect to halve the deficit by next year and get rid of it altogether by 2015.  Seems hopeful given our spending still exceeds revenues and this is based upon rosey projections of job growth.  Meanwhile glance around the world and it seems we are entering a new phase of trouble.  We say look out for higher taxes – even if they are somewhat hidden taxes like yesterday’s announcement of the trebling of earthquake levies. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10758249
And higher costs of living and continued stagnation in wages.

Pub logic as to why Gold is (not) in a bubble

One of us had a conversation with an acquaintance this week over a beer where they reckoned gold was definitely in a bubble – their reasoning because it had gone up so much it had to be.

Our counter was not to look at the price of gold as going up but rather that gold was a measure of the worth (or worthlessness) of paper money.  So taking this view you could argue that it is paper money that is the bubble and gold is merely a measuring stick for this.  Then ask yourself, do you think paper money could be devalued even more?  We’d suggest that this weeks announcement form the BoE is even more evidence that it can.  So then you could argue that gold will likely have further to run.

Another reason why gold and silver are not in a bubble

We came across an interesting wee article on the Sovereign Man website a few days ago which featured little old NZ -Why I’m still buying gold and silver after a 10 year bull run.

It features a photo of a gold  buyers kiosk in Auckland and the writer theorises that until he instead sees dozens of gold sellers kiosks around cities the world over he’ll keep buying gold and silver.  I think we voiced a similar opinion a 18 months ago.

This weeks articles

We’ve just got a couple of articles for you this week.  But one is a longish one we just put together in response to a question we had from someone recently Should I sell my home and buy precious metals?

The other is a look at what could be done to get us out of the economic pickle we find ourselves in The Way out of our Economic Mess.

Attention Expat NZers wanting to buy gold:

A reminder for the ex-pat NZers in our readership that our suppliers also have AUD, USD, EUR and GBP foreign currency denominated accounts.  So if you have funds off shore that you are looking to repatriate back to NZ to buy gold and/or silver with this can save you a fair bit on the steep foreign currency exchange rate charges you’d normally get hit with from the banks in transferring back to an NZD bank account before buying.  If you’d like to know more about that give David a call on +64 9 281 3898 or email orders@goldsurvivalguide.co.nz.  And as usual for locals you can call 0800 888 465.

Canadian Silver Maple Coins

Also a reminder from last week that one of our suppliers now has a pretty decent deal going on 1 oz Canadian Silver Maple coins.

 

Have a golden week!

 

Glenn (and David).
Founders
Gold Survival Guide

twitter.com/goldsurvival

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One thought on “Why gold is not in a bubble

  1. Pingback: Long term view of gold in NZD | Gold Prices | Gold Investing Guide

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