Prices and Charts
NZD Gold up 1% and Closing in on All Time Highs
Gold in New Zealand dollars was up $32 from a week ago. Sitting at $3283 it is not far below the all time highs at $3300. (Note: Stockcharts use the nearest futures month price in their charts and this remains higher than the spot price). However the RSI is again into very oversold territory above 70. So we should expect a pullback very soon. Maybe a dip back down to the 200 day MA currently approaching $3100? Still a chance remains of a dip to the blue uptrend line at $3000. But odds favour the bottom being in at $3050.
Meanwhile USD gold was actually down $11 for the week to $1927. Pulling back after bouncing up from the 200 day MA. Need to see a higher high above $2000 next.
But Silver Down for the Week
As we expected NZD silver pulled back this week. Down a hefty 3.3% after touching the overhead downtrend line and getting very overbought on the RSI. There remains a chance of a dip down to the uptrend line which currently sits at $36.50. But any fall near to or below the 200 day MA ($37.79) should be viewed as an excellent buying opportunity.
A similar situation with USD silver also getting close to the downtrend line in this wedge formation. Any return to the lower uptrend line will also be a great buy zone. The wedge is getting more and more compressed and silver will have to break out of this soon.
NZ Dollar Even Weaker Below 0.59
The New Zealand dollar hit a 10 month low today, breaking below the support line at 0.59. It is down 90 basis points (1.5%) from 7 days prior. There is no obvious support until 0.5550. However the Kiwi is also getting close to being very oversold again. So a decent bounce wouldn’t be a surprise.
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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Is There a Kiwisaver Gold Fund or Gold Investment Option?
Kiwisaver has grown in popularity as a retirement savings scheme in New Zealand, but does it offer any exposure to gold? In this article, you will learn why gold is a valuable asset for your portfolio, especially in times of economic uncertainty and currency devaluation. You will also find out if there is a Kiwisaver gold fund that allows you to invest in physical gold or gold-related securities. Read on to discover how you can diversify your Kiwisaver with gold and protect your wealth from inflation and market volatility. But also what the downsides of gold in Kiwisaver investments are:
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.
Singapore Increases Gold Reserves by 48% Since Dec 2022
It seems the leaders in Singapore know the importance of holding gold in current times…
“Data from the Monetary Authority of Singapore shows its #gold reserves rose by 2 tonnes in July. This lifts total gold reserves to 227 tonnes, 74 tonnes (48%) higher than at the end of December 2022.”
Source.
Singapore is also very transparent about this.
This short video shows some journalists being allowed into the vault for the first time ever.
And as James Anderson points out:
“Also, they’re wise to show it off to their citizens
and humble brag how Sovereign Wealth Fund is performing well, certainly helps build trust”.
China also continues to import more gold as well as not export any (which is illegal).
Analyst and expert on the subject Jan Nieuwenhuijs estimates that:
“…China’s official gold reserves reached 5,029 tonnes by the end of June 2023. In the first six months of 2023 the Chinese central bank bought an estimated 353 tonnes. Although demand in H1 2023 was down 34% from H2 2022, demand was still strong and a driving force of the price of gold.”
Source.
Also like Singapore, China is highlighting the importance of gold to its citizens, making it easy for them to purchase even very small amounts of gold. Here’s some key points from a very interesting article in June at the Jerusalem Post:
“Last week an event occurred which was completely missed by the mainstream media. The People’s Bank of China (PBOC) took the next important step to encourage a wider and less wealthy section of Chinese citizens to purchase gold and silver bullion. The PBOC opened the facility for citizens to convert renminbi cash savings held in the public’s own bank accounts to be converted into physical gold at the click of a button.
As we saw back in 2010, the PBOC began sending a message to all global liquidity providers that they are going to defend the value of these gold positions for their own citizens. This freshly introduced gold savings program advises citizens to make regular monthly purchases with the expected return of these investments to rise solely from gold price appreciation. This sends a clear message that the gold price is going to rise from current levels.
…The last time China incentivised her citizens to buy gold bullion bars and coins was directly after China removed controls on precious metals in 2010. Some investors may recall when state-owned Chinese television channels began openly advertising investing in gold on mainstream television in conjunction with house-sized billboards with advertisements to encourage China’s growing middle class to buy gold as an investment.
…For reference, the gold price was benchmarked in London at $1100 in 2010 when the Chinese government started to advertise gold investment to its population. By no coincidence, not once since then has the gold price traded below that level.
…For reference, the gold price was benchmarked in London at $1100 in 2010 when the Chinese government started to advertise gold investment to its population. By no coincidence, not once since then has the gold price traded below that level.
…What is also impressive about the gold savings scheme is that physical gold can be withdrawn from the Shanghai exchange on a t + 0 basis, which is immediate. Therefore, these purchases constitute real bullion held in the name of each client’s personal account rather than unallocated bullion.”
Source.
But Flows into Gold ETFs Are Down
However the flow of funds into gold Exchange Traded Funds (ETFs) remains very low despite the price of gold holding up well.
Care of Ronnie Stoeferle…
Nice one by the fabulous @jessefelder
“Sentiment, too, looks very favorable for a breakout higher in gold prices. Typically, ETF flows follow price changes in the precious metals markets. Over the past nine months or so, however, gold price have rallied strongly back near their highs and ETF holdings have fallen to new lows. This suggests that investors are significantly underinvested in gold right now and a breakout could play catalyst for a major rush into the asset class that would power the move higher suggested by the charts above.”
Source.
Another Indicator That Gold is Due a Rise
We also have the positioning of money managers vs banks and commercial hedgers in gold futures indicating gold is due to rise…
“The less long or more short the Funds / Money Managers are, the more bullish it is for Gold, because the Funds tend to wrong at extremes.
Whereas when the Banks/Commericals are less short, or more long, they tend to be right at extremes. This is bullish.
…Funds have their lowest net long position since Nov 8, 2022 when Gold was at 1716.
Commercials and Banks have their lowest net short position since Mar 7, 2023 when Gold was at 1820.
Over the past 5 weeks, Funds have slashed their longs by 106k contracts, or “92%”, the fastest pace since May 22, 2018, over 5 years ago, when Gold was at 1327.”
Source.
A Big Difference Between the 1970’s and Today
In recent months we’ve been comparing today’s inflationary environment with that of the 1970’s. We’ve seen there looks to be quite a bit of similarity to the 70’s.
But Tavi Costa points out a significant difference between then and now in the USA:
“A notable contrast to the inflationary period of the 1970s is the prominence of today’s inequality problem.
Different from the broad wage-price spiral experienced back then, the convergence of the current wealth gap disparity and a substantially elevated cost of living is set to concentrate the growing wage pressure predominantly among the lower classes.
This mirrors what is often witnessed in emerging markets.
To confront these challenges, these economies tend to prioritize extensive fiscal stimulus measures aimed directly at addressing social welfare issues, thereby contributing to the exacerbation of the inflationary problem.
Developed economies are starting to adopt similar policies, although these trends are still in their early phases.”
Source.
So to summarise, the 1970’s actually saw the share of the wealth grow for the bottom 90% and it fall for the top 0.1%. The exact opposite of the trend in play now. Costa points out that we are likely to see policies in the west that aim to support the lower class, but will actually end up stoking inflation instead. So expect higher inflation to last much longer than most people expect.
Are you prepared for potentially many years of loss of purchasing power?
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