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.
