Monday, 12 July 2010
Tuesday, 29 June 2010
Update 29 June
Gold
Gold is back around USD$1,238 (bid) / USD$1,244 (ask) after breaching USD$1,262 on Monday (in the early hours of Tuesday NZT). A large drop of more than twenty dollars after reaching the USD$1,262 in a few hours was due to profit-taking.
Reuters reports: "Gold is likely to remain pretty well supported in the current quarter. Safe-haven demand for gold remains prominent," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney, adding that Monday's decline did not represent a fundamental change in gold views.
Gold is back around USD$1,238 (bid) / USD$1,244 (ask) after breaching USD$1,262 on Monday (in the early hours of Tuesday NZT). A large drop of more than twenty dollars after reaching the USD$1,262 in a few hours was due to profit-taking.
Reuters reports: "Gold is likely to remain pretty well supported in the current quarter. Safe-haven demand for gold remains prominent," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney, adding that Monday's decline did not represent a fundamental change in gold views.
CBA Commodities reports "We expect that safe-haven demand will support the gold price at around current or higher levels in the coming quarter. But that the gold price may fall back over the course of 2011 as improvement in the international economic environment reduces safe-haven demand."
However, thebulliondesk.com cautions "Last week's reports on the US economy suggested its recovery may stutter and traders have turned cautious in case the trend is confirmed this week."
Currency
Reuters reported that the NZD/USD opened around 0.7088 and traded a narrow 0.7067/0.7106 range for the entire NY day Kiwi tracked Aussie for most of the day slipping briefly at the NYSE open then recovering toward the London close.
NZD Gold
With currency trading fairly tightly, the NZD price has been tracking the USD price and currently gold is sitting close to our report last Friday at NZD$1740 (bid) / NZD$1778 (ask).
Economies
Take a look at this interesting and amusing video from over the ditch
Friday, 25 June 2010
Gold eases back from Monday's high
Gold
The gold price dropped from Monday's highs due to profit taking and fell to around USD$1,232 before recovering to $1,242 (bid) / $1,247 (ask) on Friday morning (NZT).
All in all it has been an eventful week with reached on Monday. Typically June and July are slow months due to summer holidays in the northern hemisphere, but weak US data and a continuation of Eurozone debt issues has lead to more activity.
The Bullion Desk said in today's update "Gold prices strongly rebounded during afternoon trade on Thursday, as record high Greek credit-default swaps triggered safe-haven demand, while buying also emerged for exchange-traded funds based in Switzerland, traders said."
The Inflation Debate
"The gold market was partially supported off the Fed's widely expected promise to leave US interest rates low for an extended period of time. However, gold was also somewhat undermined by suggestions that the Fed was a little more guarded on the track of the US economy," said Nell Sloane at NS Futures. "In the near term, the gold trade will probably continue to focus on the debate over the direction of the global economy and the prospect of deflation or inflation," Sloane said, adding that resistance stood at $1,259.20 and support at $1,214.90 per ounce.
There are countless discussions going on about inflation, hyperinflation, deflation and stagflation but we found this interesting article about hyperinflation that we thought you might like.
Currency
Yesterday the NZD/USD reached a 6 week high of 0.7161 and is currently sitting around 0.7020 (ask) and 0.7125 (bid). This small decline is due to a combination of risk aversion and profit taking.
NZD Gold
Currently gold is sitting around NZD$1,740 (bid) and NZD$1,777 (ask).
The gold price dropped from Monday's highs due to profit taking and fell to around USD$1,232 before recovering to $1,242 (bid) / $1,247 (ask) on Friday morning (NZT).
All in all it has been an eventful week with reached on Monday. Typically June and July are slow months due to summer holidays in the northern hemisphere, but weak US data and a continuation of Eurozone debt issues has lead to more activity.
The Bullion Desk said in today's update "Gold prices strongly rebounded during afternoon trade on Thursday, as record high Greek credit-default swaps triggered safe-haven demand, while buying also emerged for exchange-traded funds based in Switzerland, traders said."
The Inflation Debate
"The gold market was partially supported off the Fed's widely expected promise to leave US interest rates low for an extended period of time. However, gold was also somewhat undermined by suggestions that the Fed was a little more guarded on the track of the US economy," said Nell Sloane at NS Futures. "In the near term, the gold trade will probably continue to focus on the debate over the direction of the global economy and the prospect of deflation or inflation," Sloane said, adding that resistance stood at $1,259.20 and support at $1,214.90 per ounce.
There are countless discussions going on about inflation, hyperinflation, deflation and stagflation but we found this interesting article about hyperinflation that we thought you might like.
Currency
Yesterday the NZD/USD reached a 6 week high of 0.7161 and is currently sitting around 0.7020 (ask) and 0.7125 (bid). This small decline is due to a combination of risk aversion and profit taking.
NZD Gold
Currently gold is sitting around NZD$1,740 (bid) and NZD$1,777 (ask).
Monday, 21 June 2010
Gold hits fresh highs in USD, unchanged in NZD
Gold
Gold has been on upward trajectory since last week and Friday's close of the New York market saw prices up at USD$1,256.60 after hitting a high of USD1,262.70 earlier in the session. After some turbulence this morning (New Zealand time) the USD spot price seems to be holding steady around $1,257 (bid) and $1,262 (ask).
Sitting steadily above $1,250, gold looks set to challenge $1,280 and $1,300. In fact, Standard Chartered Bank expects gold to average $1,300 in Q3 of this year and $1,400 in Q4.
So why the climb?
There are several reasons why gold keeps climbing. Recent data out of the US has been poor, including jobless claims. Combine this with the enduring rumours that Spain will be the next to ask for a bailout, concerns about spread of debt in the eurozone and signs of inflation in emerging markets.
But the major influence has been the announcement that the EU will stress test its largest banks.
"Some of the rationale to take gold prices higher was provided by news that the EU planned to stress-test 25 of its largest banks under a scenario of slowing economic growth and elevated stress in sovereign debt holdings," said analyst James Steel at HSBC.
If any of Europe’s major banks do not pass the stress test, the ensuing flight to safety could push gold prices even higher, while physical demand remains strong, Steel said.
Gold has been on upward trajectory since last week and Friday's close of the New York market saw prices up at USD$1,256.60 after hitting a high of USD1,262.70 earlier in the session. After some turbulence this morning (New Zealand time) the USD spot price seems to be holding steady around $1,257 (bid) and $1,262 (ask).
Sitting steadily above $1,250, gold looks set to challenge $1,280 and $1,300. In fact, Standard Chartered Bank expects gold to average $1,300 in Q3 of this year and $1,400 in Q4.
So why the climb?
There are several reasons why gold keeps climbing. Recent data out of the US has been poor, including jobless claims. Combine this with the enduring rumours that Spain will be the next to ask for a bailout, concerns about spread of debt in the eurozone and signs of inflation in emerging markets.
But the major influence has been the announcement that the EU will stress test its largest banks.
"Some of the rationale to take gold prices higher was provided by news that the EU planned to stress-test 25 of its largest banks under a scenario of slowing economic growth and elevated stress in sovereign debt holdings," said analyst James Steel at HSBC.
If any of Europe’s major banks do not pass the stress test, the ensuing flight to safety could push gold prices even higher, while physical demand remains strong, Steel said.
Currency
The New Zealand dollar has crept still higher over the weekend, currently sitting around 0.7067 (bid) and 0.7175 (ask).
The big story in currency over the coming weeks will be China's decision to allow the yuan more flexibility. While a number of governments internationally, including the US have been asking for this for some time, in the short term, the result may not be as anticipated. If the Euro continues to fall against the USD, the yuan could actually depreciate. See the full story here China forex move could thwart U.S. hopes
NZD Gold
Again NZD gold is relatively static, with spot prices at NZD$1,755 (bid) and NZD$1,787 (ask), with the NZDUSD exchange rates offsetting another strongincrease in USD gold. This stabilises the price in NZD over the past week, due to currency strengthening along with gold prices.
Friday, 18 June 2010
No change in local gold price, despite USD$10 rise
Gold
"We are getting close to month- and quarter-end, so I would think if not this Friday then next Friday we will see some real action," a Swiss trader said. As well, lingering doubts over the health of the eurozone, combined with end-of-week book-squaring, could add to upside pressure.
The data put a halt to a rally on Wall Street, weakened the dollar and led to a run on gold.
Currency
With a softening of the USD against the kiwi on the back of jobless claims, the NZD is sitting around .7086, which is a .5c improvement on Wednesday's figure.
NZD Gold
Gold in NZD is currently sitting around NZD$1785, which is little change from Wednesday's price, despite a jump in USD gold. An improvement in the NZD has meant that despite a USD$25 improvement in gold prices, NZD gold is actually NZD$10 less than a week ago.
Gold surged to multi-week highs during Thursday night trading, as poor US data and continued economic uncertainty sparked safe-haven buying, sparking gold to a run towards fresh record highs. Currently sitting fairly steadily around USD$1248, the price briefly edged up to USD$1251.30 at one stage. This isn't far off the high of $1252.30 we saw on June 8th.
"We are getting close to month- and quarter-end, so I would think if not this Friday then next Friday we will see some real action," a Swiss trader said. As well, lingering doubts over the health of the eurozone, combined with end-of-week book-squaring, could add to upside pressure.
The concerns in the market are still Greece and US jobless figures. Most recently t
he US Labor Department reported weekly jobless claims rose 12,000 to 472,000 when a drop of 8,000 to 452,000 had been expected, and the Philly Fed’s index showed manufacturing growth slowed down considerably in June.The data put a halt to a rally on Wall Street, weakened the dollar and led to a run on gold.
Currency
With a softening of the USD against the kiwi on the back of jobless claims, the NZD is sitting around .7086, which is a .5c improvement on Wednesday's figure.
NZD Gold
Gold in NZD is currently sitting around NZD$1785, which is little change from Wednesday's price, despite a jump in USD gold. An improvement in the NZD has meant that despite a USD$25 improvement in gold prices, NZD gold is actually NZD$10 less than a week ago.
Thursday, 17 June 2010
Complete our survey and go in the draw to win an NZD$800 prize
We have been making a few changes to the way we communicate of late. As part of these changes we are also reviewing our current website, email and social media use.
We would love to hear your feedback on the type of information you would like to see, so please fill out our survey http://www.surveymonkey.com/s/bullion. We are offering matching His and Hers coin watches, valued at over NZD$800 RRP, to one lucky winner who fills out the survey.
If you have any other questions or suggestions to help us improve the way we communicate with you, please feel free to email them through to nicola.hoogenboom@nzmint.com
Thanks and happy surveying!!!
This competition is now closed. You can view our new website at www.nzmint.com!
We would love to hear your feedback on the type of information you would like to see, so please fill out our survey http://www.surveymonkey.com/s/bullion. We are offering matching His and Hers coin watches, valued at over NZD$800 RRP, to one lucky winner who fills out the survey.
If you have any other questions or suggestions to help us improve the way we communicate with you, please feel free to email them through to nicola.hoogenboom@nzmint.com
Thanks and happy surveying!!!
This competition is now closed. You can view our new website at www.nzmint.com!
Wednesday, 16 June 2010
Gold lifts as investors move out of euro
Gold
The gold price has strengthened to USD$1237 as investors move out of euros after learning Moody's downgraded several Greek banks after cutting the government's credit rating to junk.
Gold still remains relatively range bound between USD$1220 and USD$1240. The next resistance level USD$1250 was broken through on June 8th, but without strong backing this looks to be a way off from reoccurring.
Currency
Light trading of the NZD overnight saw it pick back up to just below the 0.70 mark again to 0.6933, which feels like a long way off from the lows of the last few weeks.
The gold price has strengthened to USD$1237 as investors move out of euros after learning Moody's downgraded several Greek banks after cutting the government's credit rating to junk.
Gold still remains relatively range bound between USD$1220 and USD$1240. The next resistance level USD$1250 was broken through on June 8th, but without strong backing this looks to be a way off from reoccurring.
Currency
Light trading of the NZD overnight saw it pick back up to just below the 0.70 mark again to 0.6933, which feels like a long way off from the lows of the last few weeks.
NZD Gold
In spite of a rise in the gold price since Monday, a stronger NZD is again making gold cheaper to buy locally at NZD$1785.
Interesting Developments
- MIT in the US has found that using gold and platinum nanoparticles could make the lithium-air batteries used in electric vehicles significantly more effective. Commodity Online Story
- The number of bank closures in the USA has increased significantly in the past 3 years, see this Nifty Flash Map
- The fed reserve has sold 1.15bn in a Term Deposit Auction Bloomberg Story
Monday, 14 June 2010
NZ dollar up above 0.69
Gold
Gold closed higher over the weekend, and has again pushed higher on Asian trading this morning. Closing at USD$1225 on Friday it has pushed through to USD$1235 on short covering and continued aversion to risk.
Traditionally gold is quieter in June and July during the summer holiday period in the US. Combine this with the DuanWu holiday (also known as the Dragonboat Festival) throughout China and SE Asia and we may see weak movement in the gold prices until Thursday when Asian countries comes back from holiday.
Currency
The NZD increased against the USD at the end of the week, increasing from around 0.65 back up to 0.69, partially due to the increase in the OCR rate, and more confidence in the riskier markets - making the NZD$ more attractive to FX investors again.
NZD Gold
Interesting articles
Gold closed higher over the weekend, and has again pushed higher on Asian trading this morning. Closing at USD$1225 on Friday it has pushed through to USD$1235 on short covering and continued aversion to risk.
Traditionally gold is quieter in June and July during the summer holiday period in the US. Combine this with the DuanWu holiday (also known as the Dragonboat Festival) throughout China and SE Asia and we may see weak movement in the gold prices until Thursday when Asian countries comes back from holiday.
Currency
The NZD increased against the USD at the end of the week, increasing from around 0.65 back up to 0.69, partially due to the increase in the OCR rate, and more confidence in the riskier markets - making the NZD$ more attractive to FX investors again.
NZD Gold
Despite a USD$15 rise in the gold price since Friday's update, NZD gold is only up $4 to $1800 on a stronger kiwi dollar.
Interesting articles
Friday, 11 June 2010
New Zealand dollar puts a shine on local gold prices
Gold
Gold is down to US$1220 as investor become more optimistic regarding economic growth.
"With a favourable Spanish auction result overnight, a much stronger than expected Chinese export tally and an upward bias in many global equity markets, it would seem like the flight to quality angle in gold is still being tamped down," said broker Nell Sloane at NS Futures.
Following yesterday’s positive comments by [US Federal Reserve chairman Ben] Bernanke on the US economy, profit-taking in gold continues apace," analyst Walter de Wet of Standard Bank said. "Scrap selling has re-emerged with gold above $1,230, which has capped rallies."
"However, we maintain that dips should be bought," he added. "China’s foreign reserve holdings and, by implication, global liquidity are set to increase further, confirming that the longer-term upward trend in gold remains in place."
Gold logged an all-time high of $1,254.50 per ounce on Tuesday as fears the eurozone debt crisis could spread to the UK caused investors to look for a safe haven.
Gold is down to US$1220 as investor become more optimistic regarding economic growth.
"With a favourable Spanish auction result overnight, a much stronger than expected Chinese export tally and an upward bias in many global equity markets, it would seem like the flight to quality angle in gold is still being tamped down," said broker Nell Sloane at NS Futures.
Following yesterday’s positive comments by [US Federal Reserve chairman Ben] Bernanke on the US economy, profit-taking in gold continues apace," analyst Walter de Wet of Standard Bank said. "Scrap selling has re-emerged with gold above $1,230, which has capped rallies."
"However, we maintain that dips should be bought," he added. "China’s foreign reserve holdings and, by implication, global liquidity are set to increase further, confirming that the longer-term upward trend in gold remains in place."
Gold logged an all-time high of $1,254.50 per ounce on Tuesday as fears the eurozone debt crisis could spread to the UK caused investors to look for a safe haven.
Currency
Yesterday the RBNZ increased the OCR by 25 basis points, to 2.75%, a move that was widely expected. There is an expectation that rate increases will continue to rise, provided that the sovereign debt crisis does not effect local funding costs.
The result of the OCR increase has been a rally of the New Zealand dollar, which was up against major currencies this morning and currently sits around 0.684 against the US dollar.
NZD Gold
Due to favourable exchange rates, the NZD gold price is down almost NZD$90 on Wednesdays price to NZD$1796, despite a much smaller fall in the USD spot price. This is good news locally, as gold becomes better value in local currency, providing good opportunities to buy.
Wednesday, 9 June 2010
Update 9 June 2010
Gold
Spot gold rose to a lifetime peak of $1,252.30 per ounce overnight as poor European economic releases compounded already fragile investor mood before settling back despite another brief run-up to $1,245.20/1,246, still up $5.30 from the previous session.
Last time we provided an update the gold price was at USD$1208, so why the big change? Firstly, there was a large upward swing late Friday (Saturday New Zealand time) due to poor jobs figures in the US, which sent the dow tumbling and gold right up. Secondly, the European debt crisis seems to be getting worse, not better, with Hungary joining the list of possible defaults.
Analyst Walter de Wet of Standard Bank commented "While we could see some profit-taking, especially in the physical market as gold targets new highs, we do not expect a steep decline in the gold price as we did in May," he added. "Globally risk remains high, and gold and the dollar are reaping the benefits."
Spot gold rose to a lifetime peak of $1,252.30 per ounce overnight as poor European economic releases compounded already fragile investor mood before settling back despite another brief run-up to $1,245.20/1,246, still up $5.30 from the previous session.
Last time we provided an update the gold price was at USD$1208, so why the big change? Firstly, there was a large upward swing late Friday (Saturday New Zealand time) due to poor jobs figures in the US, which sent the dow tumbling and gold right up. Secondly, the European debt crisis seems to be getting worse, not better, with Hungary joining the list of possible defaults.
Analyst Walter de Wet of Standard Bank commented "While we could see some profit-taking, especially in the physical market as gold targets new highs, we do not expect a steep decline in the gold price as we did in May," he added. "Globally risk remains high, and gold and the dollar are reaping the benefits."
Gold also set new lifetime highs across a multitude of currencies as risk aversion surged, including Canadian dollars, the yuan, Swiss francs, sterling and the euro, while also setting multi-month peaks in Australian dollars and rupees.
Currency
The New Zealand dollar has dropped from last week's 0.68 and has been trading at around 0.66 for much of this week. Tomorrow all eyes will be on the Reserve Bank as the decision on whether or not the raise the OCR is made.
NZD Gold
Spot gold in is up around NZD$1885, which is a $120 increase on the price given in last Friday's update. This is however is still a way off the NZD$1950 we saw in February of last year when the dollar was around USD$0.50
Friday, 4 June 2010
Update 4 June 2010
Gold has fallen back today, with the spot price falling to USD$1208 on confidence a US economic recovery is taking hold, which convinced tired long holders to take profits.
In New Zealand currency the dollar has risen to 0.684.
$NZD Gold: The rise in currency and drop in USD gold has resulted in a drop in the local gold price to NZD$1765.
In New Zealand currency the dollar has risen to 0.684.
$NZD Gold: The rise in currency and drop in USD gold has resulted in a drop in the local gold price to NZD$1765.
Wednesday, 2 June 2010
Update 2 June 2010
Gold has rallied over the past 7 days, with USD spot gold now at $1225. This is largely due to continuing Sovereign debt concerns in Europe, as well China's concerns surrounding the that currencies it is being paid in are risky.
In currencies the NZD has weakened against the USD on light volume, as markets took in concerns about USD funding in Europe, trouble in the Middle East, and an ECB report saying that European banks may have EUR€195 billion in write downs.
Walter de Wet goes on to say "Financial strain in the eurozone has pushed the euro to successive multi-year lows against the US dollar, sending it as low as 1.2110 on Tuesday. This has not, however, weighed on gold’s movements, with the metal mostly detaching from its historical inverse relationship with dollar/euro fluctuations."
"Since the Greek sovereign debt crisis, we have had a breakaway from the short-term correlation between the dollar and gold," Citi said. "That is because the Greek/European crisis enhances global systemic risk to the financial system (a positive long-term driver for gold)."
In currencies the NZD has weakened against the USD on light volume, as markets took in concerns about USD funding in Europe, trouble in the Middle East, and an ECB report saying that European banks may have EUR€195 billion in write downs.
This has resulted in an increase in the local gold price rising to NZD$1816.
Looking forward, analysts are predicting increases, especially due to concerns over sovereign debt.
"Gold remains well supported above $1,200 [and] dips are buying opportunities," analyst Walter de Wet of Standard Bank said. "We believe that gold will touch record highs in dollar terms soon and also see it trading above $1,300 in [the third or fourth quarter]."
The interesting thing has been that gold has not been following traditional trends.
Looking forward, analysts are predicting increases, especially due to concerns over sovereign debt.
"Gold remains well supported above $1,200 [and] dips are buying opportunities," analyst Walter de Wet of Standard Bank said. "We believe that gold will touch record highs in dollar terms soon and also see it trading above $1,300 in [the third or fourth quarter]."
The interesting thing has been that gold has not been following traditional trends.
Walter de Wet goes on to say "Financial strain in the eurozone has pushed the euro to successive multi-year lows against the US dollar, sending it as low as 1.2110 on Tuesday. This has not, however, weighed on gold’s movements, with the metal mostly detaching from its historical inverse relationship with dollar/euro fluctuations."
"Since the Greek sovereign debt crisis, we have had a breakaway from the short-term correlation between the dollar and gold," Citi said. "That is because the Greek/European crisis enhances global systemic risk to the financial system (a positive long-term driver for gold)."
Monday, 31 May 2010
Update 31 May 2010
$USD Gold: Gold spot is sitting at around USD$1217, which is slightly up on the USD$1215 we saw Friday morning last week.
"Despite government debt and associated interest costs remaining within the AAA range, Fitch anticipates that the economic adjustment process will be more difficult and prolonged than for other economies with AAA-rated sovereign governments, which is why the agency has downgraded Spain's rating to AA+," Brian Coulton, head of EMEA sovereign ratings at Fitch, said in a statement.
"Everything seemed to be settling down ahead of the long weekend and then the debt crisis in Europe surfaced again with the downgrade to Spain. It had never really gone away, just put on the backburner, and as we saw, it quickly went from a simmer to a boil," said a trader in New York.
"As long as people are nervous, gold prices will rise," he added.
"Prices could get up to $1,225 when the market reopens on Tuesday after a three-day weekend, or they could suffer a quick correction and fall to around $1,200 if investors get rid of long positions to make up for losses in other markets," he said.
"It could go either way. On the one hand, you have people buying gold because they see it as a safe investment. On the other, with prices still relatively high, the temptation to take profits is there," he said.
Deutsche Bank recently upgraded its forecasts for gold prices to $1,450 per ounce in 2011 and $1,600 per ounce in 2012, but expected merely modest strength from gold in the near term as the market grapples with deflationary fears over the next quarter.
"After that, investors could again begin to worry about future inflation," Deutsche Bank said.
"Massive turnover has once more been seen on the PM gold fix on Friday, with traders suggesting one or more funds may be closing out its position - possibly option-related - as May draws to a close."
"Turnover stood at 695 bars per side, or around 278,000 ounces, with traders in London and Switzerland noting extremely heavy volumes this week. Gold fixed at $1,207.50 per ounce today."
"Often, central banks do business on the PM fix to get official prices - but traders said it was more likely related to funds - and options - today. Comex options expired on Tuesday and over-the-counter business on Wednesday."
NZD$: Expect moves in the NZD to be determined initially by those of the EUR which should move lower to start the week. Topside for the NZD will again be limited to resistance around 0.6850 in the short-term with current NZD/USD rates sitting at 0.6740.
NZD gold: The price of NZD gold has remained reasonably unchanged over the weekend, with the Memorial Day long weekend in the US delaying any reaction to recent news.
Friday, 28 May 2010
Update 28 May 2010
Gold started the climb back up from its dip earlier in the week, breaking through USD$1210 to peg at around USD$1215 this morning. Physical demand is the main catalyst behind the resurgence, with investor demand for bullion starting to drive the price further up.
Demand for gold in physical form has increased dramatically (similar to what we saw in 2008 at the beginning of the financial crisis) as investors move away from risk based investments and into wealth based and safe haven products (gold being the most popular of this category). This is most apparent with the increase we are seeing in US and European based buyers of gold here in NZ.
In currency, the NZD$ has dropped against the US throughout the week, only to pickup over a cent on trading last night. This is due to the Chinese reiterating their level in investments in Europe will not change, so fueling risk based appetite in the Asian markets. With the NZD/USD at around 0.68, gold is still lower in NZD than it was much of this week, despite a higher USD gold price with current spot rate around NZD$1920.
Demand for gold in physical form has increased dramatically (similar to what we saw in 2008 at the beginning of the financial crisis) as investors move away from risk based investments and into wealth based and safe haven products (gold being the most popular of this category). This is most apparent with the increase we are seeing in US and European based buyers of gold here in NZ.
In currency, the NZD$ has dropped against the US throughout the week, only to pickup over a cent on trading last night. This is due to the Chinese reiterating their level in investments in Europe will not change, so fueling risk based appetite in the Asian markets. With the NZD/USD at around 0.68, gold is still lower in NZD than it was much of this week, despite a higher USD gold price with current spot rate around NZD$1920.
New Zealand Mint has had a busy May with total buy and sell dollar volumes more than double that of any other month this year.
Thursday, 27 May 2010
Update 27 May 2010
In a month that has seen a significant jump in the gold price, New Zealand Mint has seen this translate to the trading desk.
With all of the turmoil in international markets, an NZX market correction and a 5 cent devaluation of the New Zealand Dollar, gold is certainly the performer in May, outshining the rest of the market.
Indeed trading volumes have increased significantly for the Mint, May has seen trading at 225% of January-March figures and the month hasn’t even finished! Just this week alone has seen a significant jump, with only 3 days worth of trading figures, the Mint is already 213% above the weekly average in January-March.
Even with gold hitting record prices this month, just shy of $1250, buyers are clearly seeing value in making a long term investment in gold.
With all of the turmoil in international markets, an NZX market correction and a 5 cent devaluation of the New Zealand Dollar, gold is certainly the performer in May, outshining the rest of the market.
Indeed trading volumes have increased significantly for the Mint, May has seen trading at 225% of January-March figures and the month hasn’t even finished! Just this week alone has seen a significant jump, with only 3 days worth of trading figures, the Mint is already 213% above the weekly average in January-March.
Even with gold hitting record prices this month, just shy of $1250, buyers are clearly seeing value in making a long term investment in gold.
Wednesday, 26 May 2010
Update 26 May 2010
Sorry for the delay in proving this update, we have been very busy, with Monday and today the busiest days this year!
And it is not just us, Bloomberg reports “Since the last week of April, exchange-traded products have been adding bullion at a pace not seen since the first quarter of 2009, in the wake of the collapse of Lehman Brothers Holdings Inc. Buying rose as European policymakers agreed on an almost $1 trillion emergency loan package to prevent sovereign defaults.”
Jitters around Europe have continued to cause volatility in markets, with gold prices going as low as US$1170 in the past week and the New Zealand dollar going as low as USD$0.66.
Afternoon trading on Monday (New Zealand time) saw gold prices start to rise again, with gold at intraday highs over USD$1190. The last 24 hours has seen gold once again break through USD$1200, and the NZ dollar down to 0.6640 pushing the NZ gold price to $1820 and higher.
"Uncertainty remains and fears over eurozone debt troubles prevail for the moment," broker VTB Capital noted. "We still maintain that the downside in gold will remain limited and especially if flight for safety returns."
Gold has been rising despite a rise in the USD$, again indicating that Gold is now being viewed more as an independent currency, rather than an alternate to the USD$ (historically gold has performed inversely to the USD$)
Liquidity is the key word globally. With a Bloomberg report stating “Companies have issued $47 billion of debt in May, down from $183 billion in April and the least since December 1999, data compiled by Bloomberg show.” The report goes on “Investors are fleeing all but the safest securities on concern European leaders won’t be able to coordinate a response to rising levels of government debt from Greece to Spain, while U.S. legislation threatens to curb credit and hurt bank profits. The rate banks say they charge each other for three-month loans in dollars has almost doubled since February.”
This uncertainty has meant that while the response to the budget has been largely positive, the NZD$ has been under pressure as buyers pull out of the currency markets. This trend follows the move away from the AUD$ as investors shy away from risk based products. The implication for $NZD gold is that while we are not seeing the highs of late last year, when kiwi currency was low against the greenback, $NZD rated gold is close to last week’s highs, despite the lower USD$ price.
And it is not just us, Bloomberg reports “Since the last week of April, exchange-traded products have been adding bullion at a pace not seen since the first quarter of 2009, in the wake of the collapse of Lehman Brothers Holdings Inc. Buying rose as European policymakers agreed on an almost $1 trillion emergency loan package to prevent sovereign defaults.”
Jitters around Europe have continued to cause volatility in markets, with gold prices going as low as US$1170 in the past week and the New Zealand dollar going as low as USD$0.66.
Afternoon trading on Monday (New Zealand time) saw gold prices start to rise again, with gold at intraday highs over USD$1190. The last 24 hours has seen gold once again break through USD$1200, and the NZ dollar down to 0.6640 pushing the NZ gold price to $1820 and higher.
"Uncertainty remains and fears over eurozone debt troubles prevail for the moment," broker VTB Capital noted. "We still maintain that the downside in gold will remain limited and especially if flight for safety returns."
Gold has been rising despite a rise in the USD$, again indicating that Gold is now being viewed more as an independent currency, rather than an alternate to the USD$ (historically gold has performed inversely to the USD$)
Liquidity is the key word globally. With a Bloomberg report stating “Companies have issued $47 billion of debt in May, down from $183 billion in April and the least since December 1999, data compiled by Bloomberg show.” The report goes on “Investors are fleeing all but the safest securities on concern European leaders won’t be able to coordinate a response to rising levels of government debt from Greece to Spain, while U.S. legislation threatens to curb credit and hurt bank profits. The rate banks say they charge each other for three-month loans in dollars has almost doubled since February.”
This uncertainty has meant that while the response to the budget has been largely positive, the NZD$ has been under pressure as buyers pull out of the currency markets. This trend follows the move away from the AUD$ as investors shy away from risk based products. The implication for $NZD gold is that while we are not seeing the highs of late last year, when kiwi currency was low against the greenback, $NZD rated gold is close to last week’s highs, despite the lower USD$ price.
Thursday, 20 May 2010
Update 19 May 2010
Gold dropped below $1,190 an ounce on Wednesday, as extreme volatility of the euro and losses in global equity markets prompted profit taking after rallies to record highs last week. The announcement that Germany will ban naked short selling of Government bonds and equities and naked CDS in government bonds sending the market in to a spin. There remains a significant chance that the measures could garner support/implementation from the larger euro area states. Indeed, according EU Financial Services Commissioner Michelbach, extending the short-selling ban BEYOND Germany was discussed in Brussels yesterday: “Of course, it’s all about sending symbolic headlines to markets right now to flank the rescue package. We’re in touch with European Union partners but we need to get the UK on board. This has to be EU-wide to be effective.”
For USD$ gold: "When we hit all-time highs, everybody thought gold was going to shoot straight up to the moon. Now, a lot of people decide to take their profits, and the big banks just put in sell orders that hit the market," said COMEX gold floor trader Dominick Cognata."I don't think the selling is over yet, I think we still have another $20 on the downside."
The NZD dropped 2 cents last night ( bottom of 0.666) which means in NZD$ terms the price of gold has actually increased slightly ( ~ .3% ) with the currency drop, primarily as investors pulled out of risk based investments ( including Gold ) due to the German Ban.
Here is what the picture looks like in $USD
Here is what the picture looks like in $NZD
Wednesday, 19 May 2010
Update 19 May 2010
The gold price dropped from its highs on Monday, trading as low as USD$1215 before pulling back up to USD$1225 at close of the US markets.
"Gold fell... in Europe due to profit-taking, but it is likely to remain supported due to continued concerns about sovereign debt contagion and currency risk," broker GoldCore said. "Many retail investors remain wary of bubbles and we have seen some retail buyers taking profits in recent days," it added. "Sentiment remains mildly bullish but there is no sense of a frenzy, mania or panic buying."
The NZD/USD has continued to drop, from 0.71 0.72 last week to around 0.68 0.69 at present. This drop was primarily due to risk aversion in the currencies markets (again attributable to the Eurozone crisis). This means NZD$ rated gold has increased from NZD$1880 for a gold Kiwi on Friday, to currently around NZD$1930.
Interesting articles:
"Gold fell... in Europe due to profit-taking, but it is likely to remain supported due to continued concerns about sovereign debt contagion and currency risk," broker GoldCore said. "Many retail investors remain wary of bubbles and we have seen some retail buyers taking profits in recent days," it added. "Sentiment remains mildly bullish but there is no sense of a frenzy, mania or panic buying."
The NZD/USD has continued to drop, from 0.71 0.72 last week to around 0.68 0.69 at present. This drop was primarily due to risk aversion in the currencies markets (again attributable to the Eurozone crisis). This means NZD$ rated gold has increased from NZD$1880 for a gold Kiwi on Friday, to currently around NZD$1930.
Interesting articles:
- Banks dump Greek debt on the ECB as eurozone flashes credit warnings – Evan Andrews Pritchard at the Telegraph talks about sales of Sovereign debt and how it may affect the ECB - Telegraph
- An interesting article from an Argentinean economist relating the Greek crisis to the Argentinean crash of 2001 Voltairenet
- Is Japan the next one to watch in the sovereign risk race? Seeking Alpha
Interesting videos:
Saturday, 15 May 2010
Update 14 May 2010
Spot gold prices pulled back a little overnight primarily due to profit taking, but the bullish sentiment for gold remains, with concerns over the success of the austerity measures in Europe not being effective.
"It is a whole different ball game. People are concerned that such a sacrosanct institution like the ECB can say one thing and do the opposite thing two days later," analyst Robin Bhar of Credit Agricole.
The European Central Bank said it had decided to purchase government bonds as a means to shore up the euro and prevent the spread of contagion from Greece to other southern European nations on Monday in an about-face that broke its prior stance. It also broke trust in the institution said Bhar, heating sentiment towards gold and spurring physical trade.
Overall sentiment is still positive for gold with any dips in the price being a good opportunity for buying, and global trade is still very brisk especially in Europe.
Interest Double Shot Interview: Mike O’Kane from NZ Mint on the pros and cons of Gold:
"It is a whole different ball game. People are concerned that such a sacrosanct institution like the ECB can say one thing and do the opposite thing two days later," analyst Robin Bhar of Credit Agricole.
The European Central Bank said it had decided to purchase government bonds as a means to shore up the euro and prevent the spread of contagion from Greece to other southern European nations on Monday in an about-face that broke its prior stance. It also broke trust in the institution said Bhar, heating sentiment towards gold and spurring physical trade.
Overall sentiment is still positive for gold with any dips in the price being a good opportunity for buying, and global trade is still very brisk especially in Europe.
New Zealand Mint has been in the Media a bit this week:
NZI Business Gold still an attractive investment:
http://tvnz.co.nz/business-news/nzi-business-may-14-gold-still-attractive-investment-3-01-video-3541410#Interest Double Shot Interview: Mike O’Kane from NZ Mint on the pros and cons of Gold:
http://www.interest.co.nz/ratesblog/index.php/2010/05/13/double-shot-interview-mike-okane-from-nz-mint-on-the-pros-and-cons-of-gold/
Radio New Zealand News Further rise in gold price tipped:
http://www.radionz.co.nz/news/stories/2010/05/10/124803c3fd04
Newstalk ZB Greece leaves investors going for gold:
http://www.newstalkzb.co.nz/newsdetail1.asp?storyID=175465
3News Emirates Hotel gets Midas touch as gold prices soar - see NZ Mint's Mike O'Kane on gold demand
http://www.3news.co.nz/Emirates-Hotel-gets-Midas-touch-as-gold-prices-soar/tabid/369/articleID/155629/Default.aspx
Radio New Zealand News Further rise in gold price tipped:
http://www.radionz.co.nz/news/stories/2010/05/10/124803c3fd04
Newstalk ZB Greece leaves investors going for gold:
http://www.newstalkzb.co.nz/newsdetail1.asp?storyID=175465
3News Emirates Hotel gets Midas touch as gold prices soar - see NZ Mint's Mike O'Kane on gold demand
http://www.3news.co.nz/Emirates-Hotel-gets-Midas-touch-as-gold-prices-soar/tabid/369/articleID/155629/Default.aspx
Thursday, 13 May 2010
Update 12 May
Flight to gold sees financial markets struggle
By NZ Mint head bullion dealer Mike O’Kane.
Turmoil is good for the price of gold and again financial markets are struggling against a tide of opinion that the Euro bailout package may not succeed.
At USD$1,233 overnight, gold hit its highest price ever and some analysts are predicting USD$1,250 by the weekend. The previous record price of USD$1,227 was when the NZD / USD was around 0.54.
So for Kiwi gold buyers, the relatively high NZD$ rate is helping to offset these record gold prices making it cheaper to buy here than in most countries. As an aside, gold has also hit record highs in Yen, Euro, USD$ and GBP.
Analysis
Overall financial markets globally are struggling as investors move to safe haven investments. This can be seen by the fall in US government bond yields, and the surge in the gold price.
Sovereign risk concerns are still at the forefront of most markets’ concerns, especially in Europe, so instead of moving to the normal safety of government issued bonds or the Euro, investors are moving to gold.
Volatility in the gold price is expected as we break through to new levels, but given the bullish attitude towards gold as a long term investment, the overall trend is expected to be up.
By NZ Mint head bullion dealer Mike O’Kane.
Turmoil is good for the price of gold and again financial markets are struggling against a tide of opinion that the Euro bailout package may not succeed.
At USD$1,233 overnight, gold hit its highest price ever and some analysts are predicting USD$1,250 by the weekend. The previous record price of USD$1,227 was when the NZD / USD was around 0.54.
So for Kiwi gold buyers, the relatively high NZD$ rate is helping to offset these record gold prices making it cheaper to buy here than in most countries. As an aside, gold has also hit record highs in Yen, Euro, USD$ and GBP.
Analysis
Overall financial markets globally are struggling as investors move to safe haven investments. This can be seen by the fall in US government bond yields, and the surge in the gold price.
Sovereign risk concerns are still at the forefront of most markets’ concerns, especially in Europe, so instead of moving to the normal safety of government issued bonds or the Euro, investors are moving to gold.
Volatility in the gold price is expected as we break through to new levels, but given the bullish attitude towards gold as a long term investment, the overall trend is expected to be up.
Tuesday, 11 May 2010
Update 11 May
The gold price has held around the USD$1200 mark after news of a European bailout package caused the international stock markets to recover some lost ground overnight.
"Gold held up well around the $1,200 area after the soaring stock market and ensuing euro bailout was evaluated by the markets," said George Gero at RBC Global Futures.
The ECB, IMF and EU put together a $1 trillion rescue package over the weekend and allayed fears that Greece’s debt crisis would contaminate other countries. The ECB even agreed to buy government bonds directly from EU member nations, a move previously ruled out because of fears of inflation. The overall consensus is that with a bailout of this level, money printing is about to go into overdrive in the Euro zone, a year after a similar move was introduced in the USA. Gold, historically anti-inflationary, is expected to trade within ranges over the short term, until the inflationary repercussions start to bed in – then the gold price should start to pick up sharply again.
"Gold outperformed the dollar last month, though both posted solid gains," said investment manager Andrew Karsh at Credit Suisse. "As a result, we are seeing the asset class continue to gain favour among investors in the current environment”
Stock markets around the world were positive after the announcement – the DJI was back up around 400 points
In NZD$, the focus remains overseas with the Euro, with commentators anticipating a small dip, but nothing too large or untoward.
The NZD$ gold spot price remains reasonably steady after Friday's spike.
"Gold held up well around the $1,200 area after the soaring stock market and ensuing euro bailout was evaluated by the markets," said George Gero at RBC Global Futures.
The ECB, IMF and EU put together a $1 trillion rescue package over the weekend and allayed fears that Greece’s debt crisis would contaminate other countries. The ECB even agreed to buy government bonds directly from EU member nations, a move previously ruled out because of fears of inflation. The overall consensus is that with a bailout of this level, money printing is about to go into overdrive in the Euro zone, a year after a similar move was introduced in the USA. Gold, historically anti-inflationary, is expected to trade within ranges over the short term, until the inflationary repercussions start to bed in – then the gold price should start to pick up sharply again.
"Gold outperformed the dollar last month, though both posted solid gains," said investment manager Andrew Karsh at Credit Suisse. "As a result, we are seeing the asset class continue to gain favour among investors in the current environment”
Stock markets around the world were positive after the announcement – the DJI was back up around 400 points
In NZD$, the focus remains overseas with the Euro, with commentators anticipating a small dip, but nothing too large or untoward.
The NZD$ gold spot price remains reasonably steady after Friday's spike.
Monday, 10 May 2010
Update 10 May 2010
Gold consolidated its gains on Friday trading - closing over 4% higher over the week, with the equities markets (DJI and Nasdaq in particular) wiping off all their gains from this year, as concerns over the spread of the Greek crisis continue. Hitting USD$1213 before pulling back at close of trade, the Gold Spot is currently USD$1208.
Standard Bank recently said in it's monthly report on precious metals "The escalating concerns over the risks of contagion of the Greek financial problems have cast a heavy cloud over the euro and even raised some issues about its relevance as a reserve currency."
The report went on to say "When added to reservations about the size of the US budget deficit, as voiced by Federal Reserve chairman Ben Bernanke, this has laid the foundation for gold’s rejuvenation as an asset of last resort."
Darran Grabham, an Analyst for Standard Bank added "Gold will find support at $1,150 and then $1,120, but over the long run, gold could reach $1,325 per ounce, with the next step at $1,240"
"Increasing sovereign risk is lifting appetite for gold."
Commentators appear to see prices lifting, at least in the short term.
Standard Bank recently said in it's monthly report on precious metals "The escalating concerns over the risks of contagion of the Greek financial problems have cast a heavy cloud over the euro and even raised some issues about its relevance as a reserve currency."
The report went on to say "When added to reservations about the size of the US budget deficit, as voiced by Federal Reserve chairman Ben Bernanke, this has laid the foundation for gold’s rejuvenation as an asset of last resort."
Darran Grabham, an Analyst for Standard Bank added "Gold will find support at $1,150 and then $1,120, but over the long run, gold could reach $1,325 per ounce, with the next step at $1,240"
Hussein Allidina from Morgan Stanley wrote in an e-mailed report yesterday. "We like owning gold and expect further upside as sovereign risks intensify and real rates remain anchored."
"Increasing sovereign risk is lifting appetite for gold."
Commentators appear to see prices lifting, at least in the short term.
A recent Bloomberg update stated "Gold may target its previous record as concern that financial turmoil will spread from Greece across Europe prompts investors to seek refuge in the metal"
"While contagion fears persist, gold should remain well supported and we expect gold to test its December 2009 high above $1,200 an ounce," analysts including New York-based Hussein Allidina wrote in a note to clients yesterday.
Another Bloomberg source stated "H3 Global Advisors, a Sydney-based commodities and hedge-fund manager, is banking on gold’s advance to $1,500 an ounce in the next year and reducing its exposure to industrial metals such as nickel."
One trader in New York said Greece’s debt problems were not entirely responsible for gold’s recent rise, adding that liquidity has dried up around the world. "It is now clear that there is no money of any sort available at the sovereign level."
Locally, the Kiwi dollar climbed slightly against the USD, with the agricultural commodities sector providing a good backdrop for future strength, but still very range bound between 0.71 and 0.72. This has tempered NZD$ priced gold, with the spot rate dropping its high of NZD$1700 to NZD$1680.
"While contagion fears persist, gold should remain well supported and we expect gold to test its December 2009 high above $1,200 an ounce," analysts including New York-based Hussein Allidina wrote in a note to clients yesterday.
Another Bloomberg source stated "H3 Global Advisors, a Sydney-based commodities and hedge-fund manager, is banking on gold’s advance to $1,500 an ounce in the next year and reducing its exposure to industrial metals such as nickel."
One trader in New York said Greece’s debt problems were not entirely responsible for gold’s recent rise, adding that liquidity has dried up around the world. "It is now clear that there is no money of any sort available at the sovereign level."
Locally, the Kiwi dollar climbed slightly against the USD, with the agricultural commodities sector providing a good backdrop for future strength, but still very range bound between 0.71 and 0.72. This has tempered NZD$ priced gold, with the spot rate dropping its high of NZD$1700 to NZD$1680.
Friday, 7 May 2010
Update 7 April
The gold price passed though USD$1200 an ounce as investors sought safe havens from the financial unrest in Europe and significant drops in the DJI and Nasdaq overnight.
The primary question at the moment, is whether this price increase will continue, or trigger a round of profit taking at the end of week trading tonight.
The Dow Jones dropped by 400 points on overnight trading, and then due to what has been described as “fat finger technical issues” dropped another 600 points in 25 minutes, before paring the overall loss to 450 points.
Concerns over the debt positions of more Euro countries (Spain, Portugal and Italy are being looked at closely) and the reaction to the Greek Austerity cuts are pushing investors away from the Euro and into safe haven and lower risk investments like the USD$, or Gold. This has a twofold effect for the Gold in NZD$, with the NZD/USD potentially dropping further on a strengthening USD$ and the Gold price pushing to new highs.
Silver did not move particularly much overnight trading within a USD$0.40 range.
All of this leads to what can only be described as an exciting rollercoaster ride for Gold, Currencies and equities for the short term.
The primary question at the moment, is whether this price increase will continue, or trigger a round of profit taking at the end of week trading tonight.
The Dow Jones dropped by 400 points on overnight trading, and then due to what has been described as “fat finger technical issues” dropped another 600 points in 25 minutes, before paring the overall loss to 450 points.
Concerns over the debt positions of more Euro countries (Spain, Portugal and Italy are being looked at closely) and the reaction to the Greek Austerity cuts are pushing investors away from the Euro and into safe haven and lower risk investments like the USD$, or Gold. This has a twofold effect for the Gold in NZD$, with the NZD/USD potentially dropping further on a strengthening USD$ and the Gold price pushing to new highs.
Silver did not move particularly much overnight trading within a USD$0.40 range.
All of this leads to what can only be described as an exciting rollercoaster ride for Gold, Currencies and equities for the short term.
Thursday, 6 May 2010
Update 6 April
Gold traded in a broad range yesterday, topping out over USD$1190 and reaching a low of USD$1160 overnight before returning to the USD$1175+ range for the start of trading today.
Silver followed the trend, dropping from a high of around USD$18.80 to a low of USD$17.10 before climbing back to the mid $17 range.
Prices for gold in NZD improved overnight, primarily due to the NZD/USD dropping. Currently spot is trading around NZD$1620.
Most of the movement is due to continuing Euro zone issues, with the fear of contagion now becoming the prevalent driver in most markets. The EUR€ suffered against most currencies, with NZD/EUR being the only increase in the NZD exchange stable overnight. The NZX suffered its biggest drop this year, with most markets taking large drops – fear of continuing instability moving investors away from riskier investments.
Silver followed the trend, dropping from a high of around USD$18.80 to a low of USD$17.10 before climbing back to the mid $17 range.
Prices for gold in NZD improved overnight, primarily due to the NZD/USD dropping. Currently spot is trading around NZD$1620.
Most of the movement is due to continuing Euro zone issues, with the fear of contagion now becoming the prevalent driver in most markets. The EUR€ suffered against most currencies, with NZD/EUR being the only increase in the NZD exchange stable overnight. The NZX suffered its biggest drop this year, with most markets taking large drops – fear of continuing instability moving investors away from riskier investments.
Wednesday, 5 May 2010
Update 5 May
Gold broke through USD$1190 on Tuesday night after confirmation that Greece would receive a bailout. High USD$ prices against the EUR€ saw gold pull back to USD$1170 on overnight trading, due to profit taking and to make up for losses on the stock markets.
Silver has followed gold – breaking up to USD$19 and dropping to below USD$18 overnight.
Risk aversion is expected to continue due to skepticism over the Greek bailout succeeding, coupled with rumors that Spain now require a bailout from the IMF which has been strenuously denied by Prime Minister Zapatero. Short term this may impact on the Gold futures price. Medium term, it should help bolster the spot price, as investment pulls out of the Euro and Sovereign and moves to safe haven investments such as gold.
In currencies – the NZD$ moved over 0.73 on Tuesday, pulling back by over a cent Wednesday as the USD$ strengthened due to the EUR issues. Over the ditch the AUD$ took a knock after the RBA raised their rate by .25 to 4.5 and announced it will hold at this rate for a while.
NZ currency fluctuations meant the USD$ spot price drop was covered with the exchange rate drop, again tempering any overall movement in NZD$ gold price, similar to the movements we’ve seen this year. Gold peaked just after midnight New Zealand time at around NZD$1620, with afternoon trading seeing the price down to around NZD$1600.
Looking forward we expect more volatility in currency and metal prices due to the Euro zone woes. Gold has broken through to new records in currencies in this zone (EUR, CHF and GBP ) as they drop against the USD$ and the gold spot price remains volatile.
Silver has followed gold – breaking up to USD$19 and dropping to below USD$18 overnight.
Risk aversion is expected to continue due to skepticism over the Greek bailout succeeding, coupled with rumors that Spain now require a bailout from the IMF which has been strenuously denied by Prime Minister Zapatero. Short term this may impact on the Gold futures price. Medium term, it should help bolster the spot price, as investment pulls out of the Euro and Sovereign and moves to safe haven investments such as gold.
In currencies – the NZD$ moved over 0.73 on Tuesday, pulling back by over a cent Wednesday as the USD$ strengthened due to the EUR issues. Over the ditch the AUD$ took a knock after the RBA raised their rate by .25 to 4.5 and announced it will hold at this rate for a while.
NZ currency fluctuations meant the USD$ spot price drop was covered with the exchange rate drop, again tempering any overall movement in NZD$ gold price, similar to the movements we’ve seen this year. Gold peaked just after midnight New Zealand time at around NZD$1620, with afternoon trading seeing the price down to around NZD$1600.
Looking forward we expect more volatility in currency and metal prices due to the Euro zone woes. Gold has broken through to new records in currencies in this zone (EUR, CHF and GBP ) as they drop against the USD$ and the gold spot price remains volatile.
Thursday, 22 April 2010
Update 22 April
GOLD: Gold finished up on the close of US trading at $1148/oz trading as low as $1139. Concerns around the Greek debt crisis and its impact on the Euro, gold’s safe haven status providing some further support.
Platinum Palladium and Silver all finished strongly – palladium at its highest since 2008 on a stronger Chinese auto market.
Credit Suisse raised its 2nd Qtr forecasts for base and precious metals, with the expected range $1100 - $1200. The main concern is interest rates, with rising interest rates possibly having an effect on investor demand.
NZD: The Kiwi dollar traded within the same range as further Greek concern slowed risk appetite in the currency markets.
The IMF is still pushing for emerging Asian currencies ( including China ) to revalue/appreciate as they remain substantially undervalued ( especially in the case of the Renminbi)
USD$ and CAD$ are again at parity 1:1
Platinum Palladium and Silver all finished strongly – palladium at its highest since 2008 on a stronger Chinese auto market.
Credit Suisse raised its 2nd Qtr forecasts for base and precious metals, with the expected range $1100 - $1200. The main concern is interest rates, with rising interest rates possibly having an effect on investor demand.
NZD: The Kiwi dollar traded within the same range as further Greek concern slowed risk appetite in the currency markets.
The IMF is still pushing for emerging Asian currencies ( including China ) to revalue/appreciate as they remain substantially undervalued ( especially in the case of the Renminbi)
USD$ and CAD$ are again at parity 1:1
Wednesday, 21 April 2010
Update 21 April
Gold prices recovering following Goldman Sachs and Greece disruptions
Gold prices spent the first half of the week trending down, from USD$1160/oz on Friday, to Monday’s low of USD$1132. The fall was primarily due to a stronger USD in light of Goldman Sachs’ pending court case and continuing issues around the Greek economy causing markets to become more risk adverse.
Tuesday trading (overnight Tuesday NZST) saw a reversal of the trend with the Gold price climbing back up to USD$1140 on Wednesday morning NZST.
In currency, the Kiwi dollar has sat between USD$0.7200 and USD$0.7050. A strengthening USD has been caused by the move away from risk due to Goldman Sachs and Greece.
Locally, the CPI announcement brought the rate back in overnight. However at the close of US trading it was back over the 0.71 mark. The range has been quite firm for the Kiwi recently so it’s not expected to break out in the short term.
Looking forward, Global G7 and G20 meetings this week will put the attention back on the Yuan vs the USD.
Freight and commodity prices may be in for a bumpy ride, due to eruptions from Mt Eyjafjallajokull which have caused widespread disruption to flights in Europe.
Gold prices spent the first half of the week trending down, from USD$1160/oz on Friday, to Monday’s low of USD$1132. The fall was primarily due to a stronger USD in light of Goldman Sachs’ pending court case and continuing issues around the Greek economy causing markets to become more risk adverse.
Tuesday trading (overnight Tuesday NZST) saw a reversal of the trend with the Gold price climbing back up to USD$1140 on Wednesday morning NZST.
In currency, the Kiwi dollar has sat between USD$0.7200 and USD$0.7050. A strengthening USD has been caused by the move away from risk due to Goldman Sachs and Greece.
Locally, the CPI announcement brought the rate back in overnight. However at the close of US trading it was back over the 0.71 mark. The range has been quite firm for the Kiwi recently so it’s not expected to break out in the short term.
Looking forward, Global G7 and G20 meetings this week will put the attention back on the Yuan vs the USD.
Freight and commodity prices may be in for a bumpy ride, due to eruptions from Mt Eyjafjallajokull which have caused widespread disruption to flights in Europe.
Friday, 19 March 2010
Update March 19
An interesting Bloomberg article regarding Central bank holdings of Gold
March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”
Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.
Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.
‘At the Edge’
“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.”
Gold is up 2.7 percent this year and traded at $1,126 an ounce at 11:29 a.m. in London. The U.S. Dollar Index, a six- currency gauge of the greenback’s value, is up 2.7 percent this year after slipping 4.2 percent in 2009. Bullion typically moves inversely to the U.S. currency.
Higher prices for gold, especially in euros and sterling, may deter countries from adding further to reserves, RBS’s Moore said. Bullion climbed to a record 838.43 euros on March 5, Bloomberg data show.
“Central banks might feel somewhat embarrassed to be buying gold at records” in some currencies, Moore said. “When you have an asset trading at an all-time high, the temptation is not to purchase more.”
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
Gold price daily average in NZD$
Gold price daily average in EUR
Gold price daily average in GBP
March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”
Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.
Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.
‘At the Edge’
“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.”
Gold is up 2.7 percent this year and traded at $1,126 an ounce at 11:29 a.m. in London. The U.S. Dollar Index, a six- currency gauge of the greenback’s value, is up 2.7 percent this year after slipping 4.2 percent in 2009. Bullion typically moves inversely to the U.S. currency.
Higher prices for gold, especially in euros and sterling, may deter countries from adding further to reserves, RBS’s Moore said. Bullion climbed to a record 838.43 euros on March 5, Bloomberg data show.
“Central banks might feel somewhat embarrassed to be buying gold at records” in some currencies, Moore said. “When you have an asset trading at an all-time high, the temptation is not to purchase more.”
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
Gold price daily average in NZD$
Gold price daily average in EUR
Gold price daily average in GBP
Tuesday, 16 March 2010
Gold update March 2010
Welcome to 2010,and the resumption of service for the NZ Mint bullion blog.
Today's blog is all about comparisons over the last 10 years. We've seen significant growth in the stock markets and real estate markets, and I thought it was a good time to compare this growth against the Gold markets locally.
This chart shows the movement over the last decade of the gold price( right hand axis) vs the NZX50 index ( left Axis). The left hand axis shows the NZD$ price the NZX50 index reached from Q1 2001 through to Q1 2010, the right the Gold price in NZD valued gold.
The growth of the NZX50 index has been strong, reaching a high in 2007 of ~NZD$4400 (increase of 258%) dropping down to 3225 ( growth of 189%). In the same period NZD$ valued gold climbed to a high of ~NZD$1950 (growth of 325%)and has pulled back to around NZD$1570 ( growth of 261%) since 2001.
This chart shows the median house price (LHS axis - greeen bars) in NZ from 2000 to 2010. ( stats from the REINZ ) compared to the USD$ gold price (RHS axis -blue line) over the same period.
Growth in housing prices increased from NZD$170,000 in 2001 topping out in Q1 2010 at NZD$360,000 - a growth of 211%. The gold price climbed from USD$295 topping out in 2009 at USD$1195 ( growth of 405% ) before pulling back to USD$1100 (370%) or NZD$ terms starting at NZD$600 topping over NZD$1900 ( 316% ) and back down to NZD$1550 (258%)
From Mineweb:
$1,000 gold now more floor than ceiling
Posted: Monday , 15 Mar 2010
PERTH -
The once magical US$1,000 an ounce price for gold - once considered unachievable - will be increasingly regarded more as the future "bottom out" floor price in the immediate years ahead, according to a senior economist with the major Australian bank Westpac.
Senior economist Huw McKay told the Paydirt Australian Gold Conference in Perth today that the gold price had stepped up year on year by about US$100 an ounce above predictions, for at least the past five years.
"What we did not know was going to happen was that we were going to have such an enormous collapse in risk appetite that pushed gold beyond the US$1,000 magical barrier," McKay said.
"That has changed gold trends forever and what was once an invisible ceiling, is now more a level where we talk about the US$1,000/oz price as more of a floor price going forward.
"It is now being seen as the level at which any plunge in the gold price will start to pull out of such a dive."
McKay attributed the gold price pressures as due to the change in demand for jewellery - from two thirds of world gold consumption in 2007 to around 40% currently.
"In parallel with this, there has been an expansion in exchange traded products which have grown from accounting for 7% of total gold consumption in 2007 to 19% now.
"This is a dramatic trend movement move and it is here to stay," McKay said.
"World equity markets and financing has so much uncertainty to it that the allure of gold has never been stronger.
"Demands for gold has shifted to the investor, with very strong fundamental trends coming together to fuel investor appetite for things they can see, touch, hold and put in a warehouse. Gold certainty meets those criteria."
McKay said the turn towards gold had come out of all other asset classes as "investors try to get into something that holds value".
The Westpac executive predicted gold holding at around US$1,006/oz by the end of this year, moving only slightly higher to around US$1,030 by 2011.
and Goldcore:
Gold fell in US trading on Friday from $1,119/oz to $1,098/oz to close with a loss of 0.54% and a loss of nearly 3% for the week. Silver was again more resilient and fell less than 2% last week. Gold has range traded from $1,102/oz to $1,106/oz so far in Asian and European trading this morning. Gold is currently trading at $1,103.00/oz and in euro and GBP terms, gold is trading at €804/oz and £732/oz respectively.
World equity markets are under pressure after mixed US economic reports and Chinese monetary policy tightening concerns. Asian stocks were mostly down, as are European shares so far this morning. Increasing geopolitical tensions between the US and China is likely making markets somewhat jittery (see below).
Sovereign debt issues and currency risk remain prevalent and look set to keep gold buoyant for the foreseeable future. Indeed, gold is increasingly being seen as a safe haven currency as seen in the recent record (nominal) highs in euro and sterling due to the challenges facing the UK and European economies.
These sovereign debt issues also face the US and thus the world’s reserve currency the dollar. Late last week, S&P warned that the US’ AAA credit rating is not guaranteed and today Moody’s is warning that unless the US gets public finances into better shape, there would be “downward pressure” on its triple A credit rating.
Concerns about gold being a bubble are overdone with gold today only 19% above the price it was 12 months ago (and up 11% in sterling terms and 9% in Euro terms). While many equity markets are up by some 40% to 70% in the same period.
Silver
Silver reached as high as $17.08/oz this morning in Asia. Silver is currently trading at $16.96/oz, €12.38/oz and £11.27/oz. Silver outperformed gold again last week and continues to exhibit signs that it might soon begin to play catch up with gold and target recent record (nominal) highs.
Platinum Group Metals
Platinum is trading at $1,610/oz and palladium is currently trading at $464/oz. Rhodium is at $2,550/oz.
News
Geopolitical tensions between China and the US appear to be escalating which is another bullish factor for gold. China PM, Premier Wen Jiabao, has defended China’s increasingly assertive trade and foreign policies and vowed to fight any new signs of economic crisis and currency “protectionism”. Tensions over Taiwan and Tibet continue and he chided the US for a 'disturbance' in relations. Wen turned the tables on the U.S., renewing appeals for assurances from Washington about the safety of China's $800 billion in foreign exchange reserves invested in U.S. Treasury securities. Wen said the value of the U.S. dollar was a "big concern" and asked Washington to take unspecified steps to reassure investors.
The UK housing market has stalled again, fueling fears of a double-dip recession. There are growing concerns that the housing market could be facing a double-dip recession, as data released today shows house prices in March have risen by the smallest margin on record.
Finance ministers from the 16 countries using the euro meet today in Brussels to discuss the Greek debt crisis and Greece’s progress in introducing the austerity measures needed to regain the confidence of the markets.
From AP:
China trims holdings of US Treasury securities for third month as US federal deficit soars
The Treasury Department said Monday that China's holdings dipped by $5.8 billion to $889 billion in January compared with December.Japan , the second-largest foreign holder of U.S. government debt, also trimmed its holdings but by a much smaller $300 million, to $765.4 billion.
Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $19.1 billion in January, as net purchases of private corporate bonds fell by $24.8 billion, the biggest drop on record.
A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America's largest foreign creditor, a position it had held since its holdings overtookJapan in September 2008.
However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot. Treasury revises the data based on more detailed readings of the statistics, which do a better job of sorting out actual ownership of the bonds. This review determined, for example, that some bonds credited to Britain because they were purchased there were actually purchased on behalf of Chinese investors.
The decline in Chinese holdings is coming at a time of increased tensions between the two nations. Chinese PremierWen Jiabao on Sunday rejected American pressure on China to allow its currency to rise in value against the dollar, saying such efforts amounted to a kind of trade protectionism.
A group of 130 House members sent a letter to the administration on Monday urging the Treasury Department to cite China as a currency manipulator in a report that is scheduled to be released next month. The group also called on the Commerce Department to impose trade sanctions on China on the basis that its currency system was an unfair trade practice.
"If the administration fails to act on this issue it will hold back our economic recovery and hurt the ability of American small businesses and manufacturers to increase their production, keep their doors open and create jobs," saidRep. Mike Michaud , one of the signers of the letter.
Treasury spokeswoman Natalie Wyeth said Treasury was still reviewing the congressional letter. She said there would be no direct response to Wen's comments beyond PresidentBarack Obama 's comments in a trade speech last week. Obama said that China would make an "essential contribution" to rebalancing the global economy by moving to a more market-oriented currency regime.
The Obama administration is hoping China will resume allowing its currency to rise in value against the dollar as a way of trimming the huge trade gap between the two nations. The United States ran a deficit of $226.8 billion with China last year, the largest deficit recorded with any country. A cheaper dollar would make American products less expensive in China while making Chinese goods more expensive for American consumers.
Treasury's latest report on international capital flows showed that foreign holdings of Treasury securities increased by $17 billion in January to $3.71 trillion.
While China andJapan decreased their holdings, oil exporting countries boosted their holdings to $218.4 billion, up from $207.4 billion in December, and holdings of Treasury securities in Great Britain rose to $206 billion, up from $178.1 billion.
Rick McDonald, an economist at Action Economics, said the January report reflected a normalization of purchasing activities following a two-year credit crisis in which investors had flocked to the safety of U.S. securities in the wake of severe turmoil in global financial markets.
Julian Jessop, chief international economist at Capital Economics, said the Treasury report just affirmed market information in January that showed the dollar rising in value against most currencies with Treasury interest rates falling. Jessop said this pattern did not support concerns that foreigners were losing their appetite for U.S. bonds.
Strong foreign demand for U.S. Treasury debt helps to keep the interest rates that the government pays for that debt from rising. However, there are other factors that influence U.S. interest rates beyond foreign demand, including decisions by theFederal Reserve .
Fed policymakers have kept a key short-term interest rate at a record low of zero to 0.25 percent for more than a year and many economists believe that the Fed will continue to pledge to keep rates exceptionally low as a way to boost the economy when they conclude their regular meeting on Tuesday.
The federal budget deficit hit an all-time high of $1.4 trillion in 2009, and the Obama administration is projecting that this year's deficit will climb even higher to $1.56 trillion. But the administration is also pledging to get the deficits under control once the economy has resumed sustained growth.
Today's blog is all about comparisons over the last 10 years. We've seen significant growth in the stock markets and real estate markets, and I thought it was a good time to compare this growth against the Gold markets locally.
Gold price vs NZX50
This chart shows the movement over the last decade of the gold price( right hand axis) vs the NZX50 index ( left Axis). The left hand axis shows the NZD$ price the NZX50 index reached from Q1 2001 through to Q1 2010, the right the Gold price in NZD valued gold.
The growth of the NZX50 index has been strong, reaching a high in 2007 of ~NZD$4400 (increase of 258%) dropping down to 3225 ( growth of 189%). In the same period NZD$ valued gold climbed to a high of ~NZD$1950 (growth of 325%)and has pulled back to around NZD$1570 ( growth of 261%) since 2001.
Median house price vs Gold Price
This chart shows the median house price (LHS axis - greeen bars) in NZ from 2000 to 2010. ( stats from the REINZ ) compared to the USD$ gold price (RHS axis -blue line) over the same period.Growth in housing prices increased from NZD$170,000 in 2001 topping out in Q1 2010 at NZD$360,000 - a growth of 211%. The gold price climbed from USD$295 topping out in 2009 at USD$1195 ( growth of 405% ) before pulling back to USD$1100 (370%) or NZD$ terms starting at NZD$600 topping over NZD$1900 ( 316% ) and back down to NZD$1550 (258%)
From Mineweb:
$1,000 gold now more floor than ceiling
The price that was once an invisible ceiling, is now more likely to be the level at which a fall in the gold price bottoms out
Author: Ross LoutheanPosted: Monday , 15 Mar 2010
PERTH -
The once magical US$1,000 an ounce price for gold - once considered unachievable - will be increasingly regarded more as the future "bottom out" floor price in the immediate years ahead, according to a senior economist with the major Australian bank Westpac.
Senior economist Huw McKay told the Paydirt Australian Gold Conference in Perth today that the gold price had stepped up year on year by about US$100 an ounce above predictions, for at least the past five years.
"What we did not know was going to happen was that we were going to have such an enormous collapse in risk appetite that pushed gold beyond the US$1,000 magical barrier," McKay said.
"That has changed gold trends forever and what was once an invisible ceiling, is now more a level where we talk about the US$1,000/oz price as more of a floor price going forward.
"It is now being seen as the level at which any plunge in the gold price will start to pull out of such a dive."
McKay attributed the gold price pressures as due to the change in demand for jewellery - from two thirds of world gold consumption in 2007 to around 40% currently.
"In parallel with this, there has been an expansion in exchange traded products which have grown from accounting for 7% of total gold consumption in 2007 to 19% now.
"This is a dramatic trend movement move and it is here to stay," McKay said.
"World equity markets and financing has so much uncertainty to it that the allure of gold has never been stronger.
"Demands for gold has shifted to the investor, with very strong fundamental trends coming together to fuel investor appetite for things they can see, touch, hold and put in a warehouse. Gold certainty meets those criteria."
McKay said the turn towards gold had come out of all other asset classes as "investors try to get into something that holds value".
The Westpac executive predicted gold holding at around US$1,006/oz by the end of this year, moving only slightly higher to around US$1,030 by 2011.
and Goldcore:
Gold Supported by Geopolitical and Sovereign Risk as S&P and Moodys Warn US
GoldGold fell in US trading on Friday from $1,119/oz to $1,098/oz to close with a loss of 0.54% and a loss of nearly 3% for the week. Silver was again more resilient and fell less than 2% last week. Gold has range traded from $1,102/oz to $1,106/oz so far in Asian and European trading this morning. Gold is currently trading at $1,103.00/oz and in euro and GBP terms, gold is trading at €804/oz and £732/oz respectively.
World equity markets are under pressure after mixed US economic reports and Chinese monetary policy tightening concerns. Asian stocks were mostly down, as are European shares so far this morning. Increasing geopolitical tensions between the US and China is likely making markets somewhat jittery (see below).
Sovereign debt issues and currency risk remain prevalent and look set to keep gold buoyant for the foreseeable future. Indeed, gold is increasingly being seen as a safe haven currency as seen in the recent record (nominal) highs in euro and sterling due to the challenges facing the UK and European economies.
These sovereign debt issues also face the US and thus the world’s reserve currency the dollar. Late last week, S&P warned that the US’ AAA credit rating is not guaranteed and today Moody’s is warning that unless the US gets public finances into better shape, there would be “downward pressure” on its triple A credit rating.
Concerns about gold being a bubble are overdone with gold today only 19% above the price it was 12 months ago (and up 11% in sterling terms and 9% in Euro terms). While many equity markets are up by some 40% to 70% in the same period.
Silver
Silver reached as high as $17.08/oz this morning in Asia. Silver is currently trading at $16.96/oz, €12.38/oz and £11.27/oz. Silver outperformed gold again last week and continues to exhibit signs that it might soon begin to play catch up with gold and target recent record (nominal) highs.
Platinum Group Metals
Platinum is trading at $1,610/oz and palladium is currently trading at $464/oz. Rhodium is at $2,550/oz.
News
Geopolitical tensions between China and the US appear to be escalating which is another bullish factor for gold. China PM, Premier Wen Jiabao, has defended China’s increasingly assertive trade and foreign policies and vowed to fight any new signs of economic crisis and currency “protectionism”. Tensions over Taiwan and Tibet continue and he chided the US for a 'disturbance' in relations. Wen turned the tables on the U.S., renewing appeals for assurances from Washington about the safety of China's $800 billion in foreign exchange reserves invested in U.S. Treasury securities. Wen said the value of the U.S. dollar was a "big concern" and asked Washington to take unspecified steps to reassure investors.
The UK housing market has stalled again, fueling fears of a double-dip recession. There are growing concerns that the housing market could be facing a double-dip recession, as data released today shows house prices in March have risen by the smallest margin on record.
Finance ministers from the 16 countries using the euro meet today in Brussels to discuss the Greek debt crisis and Greece’s progress in introducing the austerity measures needed to regain the confidence of the markets.
From AP:
China trims holdings of Treasury securities
China trims holdings of US Treasury securities for third month as US federal deficit soars
, On Monday March 15, 2010, 5:02 pm EDT
WASHINGTON (AP) -- China retained its spot as the biggest foreign holder of U.S. Treasury debt in January even as it trimmed its holdings for a third straight month. The string of declines underscored worries that the U.S. government could face much higher interest rates to finance soaring budget deficits.The Treasury Department said Monday that China's holdings dipped by $5.8 billion to $889 billion in January compared with December.
Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $19.1 billion in January, as net purchases of private corporate bonds fell by $24.8 billion, the biggest drop on record.
A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America's largest foreign creditor, a position it had held since its holdings overtook
However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot. Treasury revises the data based on more detailed readings of the statistics, which do a better job of sorting out actual ownership of the bonds. This review determined, for example, that some bonds credited to Britain because they were purchased there were actually purchased on behalf of Chinese investors.
The decline in Chinese holdings is coming at a time of increased tensions between the two nations. Chinese Premier
A group of 130 House members sent a letter to the administration on Monday urging the Treasury Department to cite China as a currency manipulator in a report that is scheduled to be released next month. The group also called on the Commerce Department to impose trade sanctions on China on the basis that its currency system was an unfair trade practice.
"If the administration fails to act on this issue it will hold back our economic recovery and hurt the ability of American small businesses and manufacturers to increase their production, keep their doors open and create jobs," said
Treasury spokeswoman Natalie Wyeth said Treasury was still reviewing the congressional letter. She said there would be no direct response to Wen's comments beyond President
The Obama administration is hoping China will resume allowing its currency to rise in value against the dollar as a way of trimming the huge trade gap between the two nations. The United States ran a deficit of $226.8 billion with China last year, the largest deficit recorded with any country. A cheaper dollar would make American products less expensive in China while making Chinese goods more expensive for American consumers.
Treasury's latest report on international capital flows showed that foreign holdings of Treasury securities increased by $17 billion in January to $3.71 trillion.
While China and
Rick McDonald, an economist at Action Economics, said the January report reflected a normalization of purchasing activities following a two-year credit crisis in which investors had flocked to the safety of U.S. securities in the wake of severe turmoil in global financial markets.
Julian Jessop, chief international economist at Capital Economics, said the Treasury report just affirmed market information in January that showed the dollar rising in value against most currencies with Treasury interest rates falling. Jessop said this pattern did not support concerns that foreigners were losing their appetite for U.S. bonds.
Strong foreign demand for U.S. Treasury debt helps to keep the interest rates that the government pays for that debt from rising. However, there are other factors that influence U.S. interest rates beyond foreign demand, including decisions by the
Fed policymakers have kept a key short-term interest rate at a record low of zero to 0.25 percent for more than a year and many economists believe that the Fed will continue to pledge to keep rates exceptionally low as a way to boost the economy when they conclude their regular meeting on Tuesday.
The federal budget deficit hit an all-time high of $1.4 trillion in 2009, and the Obama administration is projecting that this year's deficit will climb even higher to $1.56 trillion. But the administration is also pledging to get the deficits under control once the economy has resumed sustained growth.
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