Thursday, July 28, 2011

It's All a Charade. Except Gold

The New Zealand, Australian and Canadian dollar fly off on to the stratosphere while other currencies burn.

The New Zealand dollar is hitting all-time highs every day. Now currently at 0.87 to the US dollar. Our exporters are hurting but our inflation is being kept further in check, and our dollars go rushing to far off lands as people purchase cheaper goods on the internet.

But our Government is playing a dangerous game of chicken. On the one hand it helps keep our unusually high borrowing needs affordable (the Christchurch earthquake has added billions to borrowing) but on the other, it punishes the manufacturing and argricultural heart of our export industry. The Government is once again looking with a view to the general election this year, rather than to what is best for the country long-term.

As the world rushes to safety, the options are getting fewer and fewer. If you live in New Zealand and watch the business news, you would be dumbfounded as to why overseas investors would consider our economy a safe-haven. But most trading algorithms probably only state the word 'commodity economy' in their tripping mechanisms, and, in times of trouble, they think anything with a hard asset backing must be fundamentally worthwhile.

That's OK, it kinda makes us feel proud down-under that we get noticed, even for the wrong reasons. A little back-water country of four million people.

But how can this continue? How much more fearful capital can a small economy absorb? Even Australia and Canada must be asking the same question. Our currencies must be near peek, you would think.

Then again, as the masters of filibustering in the US try to thrash out a debt ceiling deal, any price for our paper is possible. Eventually, like anything that is popular, too much attention will be given it and it will succumb to downward pressure.

The New Zealand dollar price in Gold is around $1860 per ounce, about $100 off it's all-time high of $1955; a good time to buy gold.

The charade continues for fiat currencies and value is the victim. Certainty is getting harder to come by in markets as Governments become market makers and algorithms become market deciders. But gold and silver remain scarce and remain unprintable.

A commodity country we may be, but what are we really worth?

Gold in New Zealand dollars: $1849.15 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $46.25 per oz
Previous all time high: $59.19
per oz

The Anglo-Far East Company
The Original Private Bullion Custodian
Your reference: an-001

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