Gold price information - week ending May 25

Weekly overview - still positive medium and long term

Gold Spot price ranges:
USD: 653.85 - 674.30
NZD: 914.72 - 900.10
NZDUSD: 0.7315 - 0.7239

Current influences on price:

A lack of exploration spending and the failure to discover any significant sized deposit is helping to keep prices buoyant Ian Cockerill CEO of Gold Fields Ltd (Worlds 4th largest mining company) told Reuters
Current annual consumption is around 85 million ounces per year, but this is not being replaced by the mining industries.
According to Cockerill: "Gold has in the past decade become the barometer of the geo-political state of the globe. With the increasing hostilities over the last 10 years, we have seen sentiment come under gold from the prices of around US$200/oz In November 200 to the current range of US$600-$700 an ounce. "
Prices are currently being suppressed due to large amounts of selling by the Central Banks with around 120 tonnes being sold in the last 10 weeks. Once these sales are finished it is expected that the gold price will increase.
Base metal prices dropped significantly late last week and early this week, which had an impact on the precious metals markets, bringing the gold price down temporarily.

Asian Markets:

Gold hoarding is becoming common in India, but even more so in China where gold purchases were around 270 tonnes in 2006 and spending on gold for investment and jewellery is stronger than ever before.
The Year of the Gold Pig has had an impact on demand as it is an auspicious year to buy Gold. This has resulted in a 27% year on year rise in consumption of gold jewellery.
The World Gold Council - WGC- has announced Q1 Jewellery spending increased to US$12bn, 38% up on last year.

Currencies:

USD vs. EUR A weaker USD against the EUR is helping to push the gold price higher as investors move away from the US dollar again. Higher oil prices are helping to subdue the USD.

USD vs. NZD NZDUSD has dropped below the .73 mark, good US economy data being released is helping to keep the NZD down. With the lower NZD this is helping to keep the gold price stable, with any drop in price being flattened out with a reduction in the exchange rate. Should the gold price increase or the exchange rate drop further we would expect to see a healthy increase in the NZD gold price.

Gas prices in US - New record reached this week - Highest ever Gas price in the US - $3.20/gallon, this is higher than the inflation adjusted price during the oil crisis of the 70s. This is expected to increase due to the lower than normal levels due to reduced refinery output.

Interesting news of the week:

A shipwreck has been found with 500,000 silver coins an estimated value of around $500m. So far the sites of the wreck (possibly off the Scilly Isles) or the name of the wreck haven’t been released, but the news of the "Black Swan" has caused quite a stir. For interesting reading have a look here - The Black Swan

Thanks for reading, have a great week.

Gold price information - week ending May 18

Welcome to the New Zealand Mint blog. We’ll be posting weekly updates on gold prices and the factors influencing them.

This week:

Weekly overview: A positive outlook - good time to buy, good time to hold.

Current influences on the price:

The NZ dollar remains high against the US. While normally the NZ dollar drops when the US dollar drops, Australian and Japanese investors are investing in New Zealand, maintaining the high rate versus the US.

This is good news for New Zealanders looking to invest in gold as gold prices are quoted in US dollars.

US interest rates are being held at 5.25%, and this has removed some strength from the exchange rate, but investors are now reacting to Bank of England rate rise of 0.25% and Euro central bank indication that there will be a rate rise there in June. This will further act in favour of the NZ dollar.

It’s also important to note that the US trade deficit has increased again - $6.2Bn since February with major companies like Wal-Mart posting their worst sales month ever. This would anticipate a further weakening in the US dollar going forward.

Oil Inventories in the US - A large rise in US oil inventories has led to reduction in investments by funds wanting to mitigate risk in the US. This has removed some of the impetus behind the Gold price. It is still rising, but not as quickly as it was. The US$700 level is still to be broken.

Interesting upcoming news – A predicted bad hurricane season for the Gulf coast of the US will have an impact on the US oil reserves – meaning many will head to gold as a hedge.

Demand for gold from the Jewellery industry is currently subdued, but is expected to pick up again when the Jewellery season begins. This will increase the price as the Jewellery sector currently uses around 80% of the gold mined each year.

Also worth noting: The Bank of Spain sold 80 tonnes (2.6 Million ounces!) of Gold in March and April which, with the increased supply, is helping to keep the price subdued in the short term. Current expectation is for a very strong medium term.

South African Gold output dropped by 10% year on year for March.

The weekly Spot range - Monday through Friday: High $NZD909 Low NZD$899.

Thanks for reading. If you have any questions, please email me Michael (at) newzealandmint.com.