Thursday, March 8, 2012

Of Interest Rates and Gold

So here in good 'ol New Zealand, the Reserve Bank Governor has kept the official cash rate at 2.5 percent.

The worry is imported inflation. Thanks to the ECB and its LTRO and the Federal Reserve and its QE, we need to control the demand for NZ dollars from the trillions sloshing around the world looking for a decent return. We suffer with our export prices being lower as well.

There was 'tepid inflation' according to the Governor, hence the stagnant OCR rate. Just tell those out there doing the real shopping each week that inflation is tepid. Tepid if you use fudged numbers.

On precious metals, it maybe that gold and silver have found a bottom this week. For what it's worth. These major bounces seem likely to continue as markets try to figure out what happens next. This week it is risk off as money flows go back again to the USD (go figure) and wait while Greece et al are sorting themselves out.

Some are calling for $1200 gold and $20 silver, but fundmanetals just don't bear this out. The debt binge of the last 40 years is coming to a head. Instead of letting it play out, fiat money is being created to keep the game going. One huge ponzi scheme. Only, not many see it.

The NZ Reserve Bank may try to control our very small patch of the woods as much as they want. They need to appear to be in control. But when you are a flea against an elephant, you are poised to be squashed.

Gold is struggling to find its fiat money value. It grows in physical tonnage by around 1.5% per year, about the same as the world population rate. Now that fiat money supply is going exponential, you tell me what will change.

Gold in New Zealand dollars: $2064.95 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $40.98 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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