Just noticing Silver reaching to AU$36 and began yearning for the good old days of the AUD:USD at 0.65 last February giving a silver price of A$55.78. So the question is: What do we need for a correction in the AUD and when will it come? (and don't say an emissions Tax, please.)
Well, tradition would have that the AUD rides high on commodities and that when demand is high the Australian dollar is high. So if china tanks, the AUD tanks. Tradition would also say that in times of crisis, the USD becomes a safe haven and so strengthens, which in turn weakens the AUD. But at the moment we have a fairly significant crisis in the Middle East and the US is still weakening. This might indicate that there has been a perception shift with regards to the safe haven status of the USD. If that was the case then I believe all the traditional scenarios go out the window. This is my 700th post
To the OP - I'm not sure I understand what you mean here. Are you saying that you want the AUD to weaken just so you can make some money off your silver? I'm happy to be corrected on this.
The AUD is not worth shit, the question you should be asking is how could the USD/Euro possibly become stronger? The US will probably introduce QE3 before year end and have no intention of increasing rates. The European union did give some hints recently that they would increase rates but with the PIIGS still on the brink of default even after bailouts... i dont see it being something welcomed by many except maybe French and Germans.
It makes sense. Say the AUD drops to 50 US cents. That means spot silver is at $72 AUD. It could be a good move to sell then, if anybody would buy. We can see the USD price of silver will go through the roof. But there's no guarantee that silver priced in AUD will do the same. Perhaps china tanks, AUD drops. Then people realise the US is finished, AUD strengthens and USD goes through the floor. You pick when to buy and sell in that scenario Silver is a currency, just like USD and AUD.
Thanks for that response Stedlar. I'm not opposed to taking profits. But a weak AUD will put a strain on our imports. I'm particularly concerned about oil. What happens when the price of oil spikes? Last time I checked oil is still traded in USD. I agree that the USD is on its way down...but I also think it is possible it will gain some strength when an oil price spike unravels, as the short term demand for USD to acquire oil will likewise increase. Hence we need to be mindful of how higher oil prices will affect us when the AUD is weak vis-a-vis the USD.
Except that Silver (and Gold) is a store of value, unlike the USD or AUD which could become worthless. Would I sell silver if the AUD was falling back toward 0.65 USD? I doubt it. I'm not a trader and I wouldn't sell a store of value for a piece of plastic that was buying less and less each day (Image the cost of fuel in that case!). I was just updating my spreadsheet and comparing the nominal gains made on purchases over the past few years. Realising that it was only a little over 12 months ago that the AUD was picking itself up of the floor and it got me to thinking about the see-saw that is the AUD to USD ratio. For instance, with little incentive for foreign investment (say the Chinese "miracle" derails or they source alternate supply), the AUD would pop but Silver might ignore it and continue its advance . . . and nominal AUD gains in silver would explode. But what of other scenarios? What if the US FED suddenly stopped buying its own debt and defaulted, would the AUD go from a risk-bet (based on cyclical resources) to a safe-haven (based on in-ground resources) or sink with the withdrawal of all the hot money floating around? What if domestic tormoil erupted in China and their focus changed from off-loading their US Treasuries for hard assets to quelling riots and keeping its population happy? Just thinking aloud.
I think you are hoping for something that is very unlikely to happen. The AUD has settled into a comfortable trading range between .98 and 1.02 and until some event is likely to stay there. Most likely occurance is that the USD dives and separates from the AUD. Could see 1.20 pretty quickly if that occurs. Get used to the AUD being worth more. The simple fact of the matter is that we been consistent in the volume of our currency while the US and others have been printing madly. So - unless/until the government or reserve bank does something stupid, the dollar will be held at higher value and is more likely to break to the upside than to the down.
I wasn't really hoping for anything, just wondering. But you are correct that Australian monetary growth has been relatively stable, only 10% growth in both M1 & M3 over the past 12 months in fact. (http://www.rba.gov.au/statistics/tables/xls/d03hist.xls?accessed=0703-23:56:13) Still, I think I would sooner bet on the Government doing something stupid than not. I guess we'll see. Thanks for the thoughts.
Hi Gino, Whilst we all would like to see the price of silver go up, achieving a 'numerical increase' via a change in the AUD/USD actually does nothing for your net wealth. Sorry! The 'higher' $55.78 price will still buy the same quantity of US goods. And within Australia your silver will still have the same value at it did before - but it will look bigger because EVERYTHING you own just shrank in value by one third! Some win eh? Silver is just doing it's hedging trick here. As Stedlar so aptly pointed out - it really IS money!
I think World Economy shrinks,China imports less ore,Aud to 65c and gold rises 45% in Aud. Looking forward to a rise of 45% increase in value in my holdings. Because downturn is unavoidable. As I understand it,and I ask for confirmation... The reason USD goes up in crisis is not because people like USD, its because in crisis international companies sell off,or don't buy stuff,i.e.Iron ore,planes.rice,cement,oil .When somethings bought or sold internationally it MUST be done in the International currency,the American dollar. When this stops people end up with a lot of the Intenational Currency in their hands. So their is high demand for it in this situation and it goes up. If the AUD was the international currency it would go up too.
Not necessarily. The dealings I have had with China over the last two (2) years have all been done in A$. The last thing that they wanted was US$.
Yes,I'm sure there are exceptions,but generally its done in the International currency.... Thus this is why in crisis USD rises? E.g. 100 Million ton of Iron Ore contracts cancelled. This explanation of why USD rises in crisis is something I read years ago.Asking if there is anyone out there that can affirm or refute this.
Speculators sell "risky" assets and buy "safe" assets in times of crisis. Safe assets are those that are most liquid or readily convertible to other forms and the "safest" assets on the planet have been US Treasury Bonds because they are denominated in the international reserve currency and earn interest. So in the "flight to safety" process during a crisis, speculators sell their Australian resource stocks, say, convert to the US dollar and buy US Treasury Bonds. It is all speculators selling foreign currencies to convert back into the USD that generates the demand for USD and sees the USD value soar relative to the international currencies that are being sold off. So when the world is in crisis, the USA is at its wealthiest compared to other states. This is simply an artefact of the USD being the international reserve currency and gives rise to the observation of a conflict of interest between a global desire for peace and the USA profiting from instability and crisis. This is known as the Triffin Dilemma . . . http://en.wikipedia.org/wiki/Triffin_dilemma Interestingly, China understands this and wants its own currency to operate as an international reserve currency and has increased the role of the Yuan in international trade settlements by an annualised 300% in January! Yuan-based trade settlement volume increases BY CHEN JIA Published: Mar 2 2011 9:51 BEIJING The transaction volume of China's cross-border trade settled in yuan has increased sharply, as the government approved pilot companies to use the currency in direct overseas investments. In the first month of this year, Bank of China's total volume of yuan-denominated cross-border trade settlement reached about 40 billion yuan ($6.09 billion), one-fourth of the 160 billion yuan for the whole of 2010, said Chen Jun, a manager from the international settlement business department of the bank on Tuesday. . . . "Allowing direct investment in the currency is a start to liberalizing the capital account and will help ease the pressure of excessive liquidity, said Xu Sheng, director of the Capital Management Department at JP Morgan Chase in Shanghai. http://www.cdeclips.com/en/business...tlement_volume_increases/fullstory_61481.html It is definitely "game on" in the international currency wars and Australia is poised between these two powers to suffer greatly in any flight to safety scenario for the AUD will be dropping against both the USD and Yuan next time round.
The whole idea of higher oil prices means stronger demand of USD means stronger USD just doesn't cut it with me. In any case, USD is not going up atm, and Middle East is in crisis with rising oil.
