Rising Auckland House Prices: Shortage or Cantillon Effect?

Rising Auckland House Prices: Shortage or Cantillon Effect?

This Week:

  • Rising Auckland House Prices: Shortage or Cantillon Effect?
  • How Much Physical Paper Money is in Circulation in NZ vs Total Bank Deposits?
  • NZ Gold and Silver Sellers Increase
  • Billionaire Hedge Funders Talk Gold Up

Prices and Charts

Spot Price Today / oz Weekly Change ($) Weekly Change (%)
NZD Gold $1878.16 + $14.29 + 0.76%
USD Gold $1277.90 – $3.70 – 0.28%
NZD Silver $25.60 + $0.29 + 1.14%
USD Silver $17.42 + $0.02 + 0.11%
NZD/USD 0.6804 – 0.0072 – 1.04%

Gold priced in NZ Dollars moved higher this week but has pulled back slightly. You can see in the chart below that it did get close to the highs from March. It is currently up close to $300 per oz year to date.

NZD Gold Chart

So far we’ve been right on silver. It has been consolidating above the former resistance line of $25. This line is now acting as support and the price is trading between that and $26.

At first glance it looks like a correction should be due, but as we outlined in last week’s feature article we reckon instead we might see an ongoing consolidation at these higher levels. This would get the RSI back down closer to neutral territory of around 50 (see the blue circle in the chart below) and set silver up for a further run higher.

NZD Silver Chart

The Kiwi dollar dropped sharply this week and is now due a bounce higher after touching on the lower Bollinger band (blue shaded area). This fall helped hold local prices up in the face of falling US gold and silver prices.

NZ Dollar

So a reversal of this trend (a stronger NZD) might weigh on local precious metals prices. But the counter to this is that it looks like US precious metals prices might be starting to tick higher again. So as always it is a case of which move is stronger that will decide the direction of local prices.

Rising Auckland House Prices: Caused by Shortage or Cantillon Effect?

The news this week here was all about whether the Reserve Bank will look at implementing further “macro-prudential tools” like debt to income ratio restrictions to try and counteract their own easy money policies. We counted 5 separate articles on the topic this morning alone in the daily NZ news summary we receive.

The consensus seems to be that the Reserve Bank needs to “do something”, while the government also needs to make it easier to build up and out.

Here’s a different angle on the cause…

Last week we wrote how Ronni Stoeferle thought a lot of institutional money was still on the sidelines for this gold and silver rally. Much of what he had to say backed up with our thoughts that a significant correction right was not that likely. We exchanged a few emails with Ronni asking how things were in his home country of Austria.

We recalled our dinner discussion with him back in 2013 after his presentation here in Auckland where similar things were going on in Vienna to Auckland with house prices moving higher.

He confirmed that “real estate prices over here [in Vienna] are crazy, but if you drive 1 hour to the countryside, they are ridiculously cheap.”

We’d commented how this seemed to be happening in many countries, with the main financial centres seeing rising housing prices. Maybe due to the finance centres being the first to see and make use of the cheap money?

He then reminded us that this is in fact a known phenomenon called the “Cantillon effect” named after after 18th Century Irish-French economist (now there’s a combination ripe for jokes) Richard Cantillon.

“We’re seeing the Cantillon effect (we are describing the consequences in our new book…did you read it?) all over the globe… large financial centers thrive, while the countryside suffers…”

We’re still waiting on a copy we’ve order of Ronni’s new book on Austrian investing:
Austrian School for Investors: Austrian Investing between Inflation and Deflation

But luckily for us he has a summary of the Cantillon effect on the incrementum website:

Austrian School for Investors“Inflation is a regressive tax, i.e. the opposite of a progressive income tax. The poorer you are, the greater the burden is. The purchasing power of income decreases, which is why inflation can also be regarded as a redistribution tax. In this context, the so-called Cantillon effect is highly relevant. This effect describes the fact that newly-created money is distributed neither equally nor simultaneously among the population. This means that people handling money partially benefit from inflation and partially suffer from it. Monetary dispersion is never neutral. Market participants who receive the new money early and exchange it for goods benefit in comparison with those who get the newly-created money later. We can see a transfer of assets from late money users to early money users.

Honey is MoneyFriedrich von Hayek once pictured the cantillon effect with the process of pouring honey into a saucer. The honey dollops in the middle first and only later it spreads out to the periphery. Prices also do not rise evenly. Typically price levels are higher in regions, which directly or indirectly benefit from monetary inflation. If you happen to live in a financial center you may have noticed.”

Source.

So could this be the cause of the outlandish real estate prices in Auckland?

Is the “honey” now spreading out from Auckland to the likes of Bay of Plenty? Rather than it just being an Auckland housing shortage?

Or maybe there are just coincidental simultaneous housing shortages in just every financial centre all over the world? Yeah that must be.

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How Much Physical Paper Money is in Circulation in NZ vs Total Bank Deposits?

Physical moneyOur feature article this week was inspired by reading some numbers for the USA. This compared physical notes and coins to total cheque and savings accounts to show how likely a bank run could be.

So we crunched some similar numbers for New Zealand. You can read that the link at below along with the original article that got us thinking about it.

How Much Physical Paper Money is in Circulation in NZ vs Total Bank Deposits?

Billionaire Hedge Funders Talk Gold Up

Get out of stocksWe’ve got an article on the site this which outlines investing legend Stan Druckenmiller’s presentation at the recent Sohn Investors Conference.

The even shorter summary of his speech is the title of the article itself:

Legendary Investor Says “Get Out of the Stock Market & Buy Gold”

Another hedge fund manager Paul Singer recently echoed Druckenmiller’s sentiments as reported by Bloomberg:

Singer Says Gold Rally Just Beginning as Goldman Sees Losses 

“Billionaire hedge fund manager Paul Singer said that gold’s best quarter in 30 years is probably just the beginning of a rebound as global investors — including Stan Druckenmiller — weigh the ramifications of unprecedented monetary easing on inflation. “It makes a great deal of sense to own gold. Other investors may be finally starting to agree,” Singer wrote in an April 28 letter to clients. “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”

Source.

The Daily Bell neatly summarised the jist of these 2 articles with this:

“When it comes to gold, then, there are two salient facts.
First, the stock market is seven years old.
Second, central banks are obsessed with liquidity as they try to create price inflation and economic recovery.This is one of those times when circumstances proclaim a given trend in an emphatic manner.Conclusion: One way or another, sooner or later, it is gold’s time (and silver’s). And maybe that time has already begun.”Source.

The Daily Reckoning reported another surprising addition to the ranks of gold bulls.

“Kenneth Rogoff, Harvard professor, chess grandmaster and author of the widely acclaimed book This Time Is Different, just sent shock waves through the global elite by recommending that emerging-market central banks buy gold to diversify their portfolios away from dollar holdings.

And JP Morgan’s Private Bank is also recommending its clients “position for a new and very long bull market for gold.” This bank is only open to wealthy clients with at least $5 million of investable assets. Later this year, the bank will require at least $10 million of investable assets. This is not for everyday Americans.

The super rich and the elites are now selling stocks and buying gold. And for good reason. Gold has fundamental support from Chinese and Russian efforts to get away from the dollar system. It also has technical support from scarcity on the physical supply side. Gold is flying off the shelves.

When elites say dump dollars and buy gold, what are you waiting for?”

As we’ve discussed before it is in the paper markets of the New York (COMEX) and London (LBMA) where the price of gold and silver are still set. So with well known hedge fund managers starting to sing its praises it makes sense that the price is rising as these guys aren’t buying from bullion dealers like us but rather with ETF’s and futures.

NZ Gold and Silver Sellers Increase

While we are noting more buying interest lately, we have also seen a spike in people wanting to sell bullion they’ve bought previously.

Note: If you’d ever like a price to sell bullion back to a refiner just visit this page and we can get you a price.

Of course we don’t know the reasons people are selling. It might be they all just coincidentally need the funds for something else. However perhaps a more likely reason is that many people still don’t believe the current rally in gold and silver can last? So they are selling into strength on the expectation that prices will fall again.

Could this well be a contrarian indicator that the price rises are just getting started?

If you believe this is true and would rather be a buyer than a seller right now, then get in touch.

Coin Premiums May Rise

If the demand in Canada and the US continues then we could well see the premiums on the likes of Canadian Silver Maples start to rise in the coming weeks and months. But for now they haven’t and delivery remains about 7-10 business days on boxes of 500 x 1oz Canadian Silver Maples delivered to your door via UPS, fully insured.

Todays price is $15,235.

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This Weeks Articles:

Ronny Stoeferle: Money on sidelines

Ronni Stoeferle: A lot of institutional money on the sidelines so no bigger gold correction

2016-05-05 01:50:06-04

This Week: A Precious Metals Correction Must Come Now? Mustn’t It? Ronni Stoeferle: Gold “A lot of institutional money on the sidelines” Financial Fault Lines Developing – But Not Needed For Gold to Still Rise Bulk Canadian Silver Maple Leaf Coins Deal 5 x Monster Boxes (2500oz) of 1oz Canadian 9999 purity Silver Maples delivered […]

Read More…
Time of the vulture

MONETARY LIQUIFACTION, GOLD AND THE TIME OF THE VULTURE

2016-05-05 21:38:25-04

Darryl Schoon returns with his thoughts on why we have seen no spikes in inflation despite the massive increase in base money supply. Plus a warning about helicopter money and why gold can protect you in both inflation and deflation…   MONETARY LIQUIFACTION, GOLD AND THE TIME OF THE VULTURE Liquifaction: … 3: conversion of […]

Read More…
Physical cash

How Much Physical Paper Money is in Circulation in NZ vs Total Bank Deposits?

2016-05-10 22:09:49-04

Bank runs might seem like a far fetched possibility, both in the USA and here in New Zealand. But the below article shows just how little physical paper currency there is available in the USA compared to the total dollars in US cheque and savings accounts. It inspired us to have bit of a dig around […]

Read More…
Get out of stock market

Legendary Investor Says “Get Out of the Stock Market & Buy Gold”

2016-05-11 17:12:20-04

Last year we had hedge fund owner Ray Dalio stating that if you don’t own gold you don’t know history. Now another investor with an excellent track record is warning that stock markets are looking overvalued and explains his reasons why he owns a very large “pig sized” position in gold… Legendary Investor Says “Get […]

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

Today’s Spot Prices
Spot Gold
NZ $ 1878 / oz US $ 1278 / oz
Spot Silver
NZ $ 25.60 / oz
NZ $823 / kg
US $ 17.42 / oz
US $ 560 / kg

7 Reasons to Buy Gold & Silver via GoldSurvivalGuide
Today’s Prices to Buy
1oz NZ 99.99% pure gold bar
1oz NZ Gold Ingot
$1942
1kg NZ 99.9% pure silver bar
1 Kilo NZ Silver Bar
$930 (price is per kilo for orders of 1-4 kgs)
$911  (price is per kilo only for orders of 5 kgs or more)
1oz PAMP Suisse 99.99% pure gold bar
PAMP Lunar Goat Gold Bar
$1990
1kg PAMP 99.9% pure silver bar
PAMP Silver
$955
1oz Canadian Gold Maple 99.99% pure gold coin
Gold Maple
$2020
1oz Canadian Silver Maple 99.99% pure silver coin (Minimum order size tube of 25 coins)
Silver Maple Silver Box
Tube of 25 $826.75
Box of 500 $15235
(Fully insured and delivered)

Note:

  • Prices are excluding delivery
  • 1 Troy ounce = 31.1 grams
  • 1 Kg = 32.15 Troy ounces
  • Request special pricing for larger orders such as monster box of Canadian maple silver coins
  • Lower pricing for local gold orders of 10 to 29ozs and best pricing for 30 ozs or more.
  • Foreign currency options available so you can purchase from USD, AUD, EURO, GBP
  • Note: Your funds are deposited into our suppliers bank account only. We receive a finders fee direct from them only.


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Our Mission

  1. To demystify the concept of protecting and increasing ones wealth through owning gold and silver in the current turbulent economic environment.
  2. To simplify the process of purchasing physical gold and silver bullion in NZ – particularly for first time buyers.

We look forward to hearing from you soon.Have a golden week!

David (and Glenn)
GoldSurvivalGuide.co.nz
Ph: 0800 888 465
From outside NZ: +64 9 281 3898
email: orders@goldsurvivalguide.co.nz

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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.


Gold Survival Guide
PO Box 74437
Greenlane Auckland 1546
New Zealand

Copyright © 2016 Gold Survival Guide.
All Rights Reserved.

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