Timing the bottom in gold

Gold Survival Gold Article Updates:

Jul. 19, 2013

 

This Week:

  • Bernanke Returns
  • Timing the Bottom
  • Will Loan to Value Restrictions “work”?

The Bernank gave another riveting performance this morning, the second we have been subjected to in 2 weeks. What he had to say could best be summed up by the phrase “on the one hand…., while on the other….”. 

In a nutshell if things get worse they may do more and if things get better they may ease back. 

He’s still keeping his options open or maybe rather trying to keep the options open for his successor. 

But certainly much less strongly worded than the initial discussion of “the taper” and he certainly seems to have backtracked from the initial mention of “later this year”.

If you need some help getting off to sleep tonight then here is the link to his prepared speechWe’ve spent a few minutes reading it and unfortunately that’s a few minutes of our lives we won’t get back. You have been warned.

Otherwise you might prefer Bloomberg which gives a decent summary here.

As Satyajit Das pointed out in a column on Bernanke and his fellow cronies across the globe, which we read earlier in the week even before Bernankes latest blathering… 

“Given the current “sea of troubles”, the high stakes and limits to their power, central bankers unable to confront the reality, have lapsed into political ‘spin’ and word games.” Source.

Word games indeed.

 

So how’d the Barnanks ramblings affect gold and silver?

Well in US dollar terms gold was bobbing just under $1300 prior to 10am New York time but then proceeded to sell off down to the US$1280 level. Silver also dropped from just above US$20 down to around $19.35.

Whereas US stock markets were pretty well unchanged while all this was going on. So interesting that both metals went lower on what the pundits will probably call a neutral outlook for the metals in regards to Bernanke’s mutterings.

The NZ dollar actually climbed slightly higher at .7905 vs .7875 yesterday. So gold in NZ dollars fell $27 to $1613, backing off a little from the strong rise it has seen this month. 

 

Silver weakened by 94 cents to $24.46 per ounce (or down $30.20 to $786.50 per kg). You can see in the chart below silver has managed to hang around what we have identified previously as likely strong support in the $22-$24 zone. NZ$24 was resistance back in 2006 and conversely was also where the previous run up to above $60 began from in 2010.

 

We are still not 100% convinced that the lows at the end of June will be the actual bottom. At the time things just seemed maybe not quite desperate and negative enough for it to be the bottom, but time may prove otherwise.

Timing the BottomSpeaking of picking the bottom one, of this weeks articles on the website looks at this very topic and points out “We don’t need to tick the exact bottom of the market; the second-best prices in ten years will still be pretty darned cheap—and much lower-risk.” Food for thought here anyway… 

Timing the Bottom

Bad for US$The next article we’ve posted is by John Williams of Shadow Government Statistics. It’s pretty lengthy but covers quite a breadth of topics including banking system solvency, the US debt ceiling, along with perhaps more accurate numbers for the US Monetary base, GDP, and median household income. He reckons the picture painted by govt numbers is not quite as rosy as they would have us believe. 

 

Market Moves Ahead Should be Good for Gold, Bad for the US Dollar

StunningWe also have a post featuring a couple of short but interesting videos looking at the recent stunning developments in silver and gold in India and China respectively.

Stunning Developments In Gold and Silver in China and India

Speaking of China, the “chart of the week” below shows just how much they like their physical gold in the east.

While the Shanghai Gold Exchange’s (SGE) volume of trades is still small compared to the likes of the Comex and London OTC gold markets, where it differs is just how many participants take delivery of their gold. The tables are in fact turned to such an extent where deliveries on the SGE not only dwarf that on COMEX, but in recent months they have been close to or even matched yearly world mining production!

Chinese Gold Demand

Source: Frank Holmes US Global Investors

 

Will Loan to Value Restrictions “Work”?

News this week seems that the loan to value restrictions that we’ve mentioned a few times in recent months could be just around the corner. In fact one headline said “Curbs on high LVR loans may come as soon as August”

Interest.co.nz reports that

“Two banking sources have told me the Reserve Bank advised them informally on Friday that it would set a ‘speed limit’ of 12% for growth of high LVR (loan to value ratio) mortgages and that a public announcement was due within days.

This would mean a maximum of 12% of total new mortgages would allowed to be in the 80% + LVR category, significantly below the 30% share of growth seen over the last year for such low deposit mortgages.”

A week ago we read this piece at the Wall Street Journal that looked at the impact of these new “macroprudential tools” across the globe. 

So what can we tell from other countries who have enacted similar policies?

Mixed results it seems. If we can believe the Wall Street Journal it worked for some like Korea and Canada (but we thought the Canadian housing market was also still meant to be one of the most overvalued though???), but hasn’t in Israel (who we have reported on previously is in a similar situation to NZ – high currency, but low interest rates already and rising housing market.)

We’ve mentioned before we have our doubts about how much impact these “macro-prudential tools” will have or rather instead whether the law of unintended consequences will mean impacts may come in places the RBNZ least expects. Like maybe encouraging more 2nd tier lenders. Finance Companies ring bells to anyone?

At the end of the day, as the US housing collapse showed the best cure for high prices is higher prices. They eventually get to the point where no one can afford or will pay them.

But perhaps the best summary was made by Anthony Wile at the Daily Bell where he finished an article on the topic of macro-prudential tools with:

“Conclusion: We guarantee that Macroprudential Policy is not going to be any more effective than any of the other price-fixing activities in which central banks are involved.”

In case you haven’t had enough of Bail-ins

Thanks go to reader “Atom” who left a comment to last week’s email where we discussed how Australia also looks to be joining the Bail-in methodology for dealing with failed banks. The blog where we noticed the report on Australia has since then mentioned NZ as well, although makes it sound like we are following suit when in fact we have been the ones at the head of the pack in terms of readying for a depositor haircut! Not necessarily something to be proud of however!

New Zealand Banks “Pre-positioning” For Cyprus-Style Bail-In

Also if all this bail-in stuff is news to you they had an interesting timeline of events that have led us from bail-outs to bail ins over the past few years.

Timeline For “Bail-In” Of G20 Banking System

And if talk of bail-ins makes you want to remove some funds from the clutches of your bank and place it into your own private wealth preservation fund, then counter-party free gold and silver will likely fit the bill. As always get in touch if you have any questions about purchasing. We’re happy to answer via email or by phone.

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 

 

 

Have a golden week!

Glenn (and David)


goldsurvivalguide.co.nz

Ph: 0800 888 465

From outside NZ: +64 9 281 3898

email: orders@goldsurvivalguide.co.nz

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This Weeks Articles

 

 

The “Grey Swan” of Interest Rate Derivatives
Derivatives2013-07-11 22:14:35-04This week… Telegraphing the gold turnaround Don’t miss out on NZ bullion tips and news… add info@goldsurvivalguide.co.nz to your address book (Learn how) Having trouble viewing this email? Can’t see pictures?  Click this link. ABOUT     |     ORDER GOLD & SILVER NOW     |      LIVE SPOT […]read more…
Market Moves Ahead Should be Good for Gold, Bad for the US Dollar
Bad for $US2013-07-15 19:07:28-04The following is a very detailed piece by John Williams of Shadow Government Statistics covering everything from the solvency of the banking system, to real US inflation, GDP, and net household income figures. Along with discussing the impacts of the still coming US debt ceiling debates and how all these will impact gold and silver […]read more…
Stunning Developments In Gold and Silver in China and India
Stunning2013-07-16 02:12:32-04Earlier in July, Chris Duane of www.don’t-tread-on.me  and the Silver Bullet Silver Shield report posted the below interesting video on silver. He stated: “Today, I learned of one of the most stunning developments in the physical silver demand I have ever seen. The physical Silver market is about to explode the paper silver market in […]read more…
Timing the Bottom
Timing the bottom 2013-07-16 21:02:34-04As the title of this post suggests timing the bottom is indeed nigh on impossible. As we wrote a couple of weeks ago back in 2008 buying was difficult when the price had fallen sharply then and while we didn’t get the bottom ourselves we held our nose and made some purchases. And in the […]read more…

 

 

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.

Today’s Spot Prices

 

Spot Gold
NZ $1613/ oz US $1275.08/ oz
Spot Silver
NZ $24.46 / ozNZ $786.50 / kg US $19.34/ ozUS $621.73/ kg

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