Expectations from AUD spot price when USD tanks...

Skyblues

Skyblues

Member
As I am writing this

US Index is at 73.90 - down from 75.64 in only a week...
GSR is at 31.5 after testing 30.45 - yea that's right after testing 30
Silver is playing at about USD47.80 and AUD44.10
AUD/USD is at 1.073 - up from 1.04 in less than a week, or up from 0.8 since June '10, meaning about 20% up in less than a year, cant begin to tell you how big a change this is...

On the one hand we are getting used to all this, somehow does not feel surprising anymore :rolleyes:...All fundamentals are quite obvious, however I am very puzzled about AUD...I have always thought that AUD would show similar symptoms as the USD and eventually would tank further down than USD...I remember vividly the day Euro hit parity, and now it is playing at about 1.5, I am not sure whether AUD is heading that direction too, because I would expect Euro to fall along with USD, farther than AUD...It feels like we are coming to the times when following Ag in USD will not mean much...

It is quite obvious that US Index and GSR will continue to go down and silver spot will keep rising, I just am not sure what to expect from silver spot price in AUD anymore. I'd appreciate if you guys share your views on this. It seems the spot price in AUD will follow the spot in USD at close proximity, but till when? AUD/USD will probably remain at least close to parity, and probably stronger, yes this will help with further stacking, however, my question is do you think AUD will end up below or above USD when USD tanks, and to what degree?

The problem is I do not think the USD tanking will be a case of bogan hit&drive, it is rather a case of AIDS, cancer or whatever you wanna imagine, a slow and steady downhill trend...If this will prove correct and AUD will remain relatively strong but close to parity, it's all good, stacking will go on and exit will be relatively easy...If it gets too strong though, it will pose a serious problem for us stackers.

People keep talking only about silver price as if it is an independent variable, this is worrying and people who have known nothing but saving accounts and term deposits are not aware of such aspects...What are your expectations from and views about Ag - AUD?

Cheers,
Sky
 
Listening to a Bob Chapman interview today he expects the USD, Pound and Euro, to lead the crash in fiat currencies, followed by other currencies eg Canada, Aussie Dollar, Brazil which he puts in a separate category.

Logically, when you see the USD collapse you will have time to organise yourself/stack silver with a relatively strong AUD according to Bob. He's got an interview with GONOB radio tomorrow morning our time I'm gonna tune into.
 
I've been stacking Au for some time now and have seen the spot in AUD flatline for last twelve months as AUD has appreciated against USD. In the event of another major economic scism, I expect the same old thing to happen - demand for resources dries up - AUD is seen as volatile and speculative and carry trade collapses, fiat repatriated to yen, USD, Euro etc and AUD falls 20-30%. This should playout to a pretty good interim profit take position.
 
The Accountant said:
I've been stacking Au for some time now and have seen the spot in AUD flatline for last twelve months as AUD has appreciated against USD. In the event of another major economic scism, I expect the same old thing to happen - demand for resources dries up - AUD is seen as volatile and speculative and carry trade collapses, fiat repatriated to yen, USD, Euro etc and AUD falls 20-30%. This should playout to a pretty good interim profit take position.
Click to expand...
This is very logical and is certainly in my thinking...BUT the question I ask myself and hopefully you ask youself is, 'How much fiat does the US have to print before it no longer becomes a flight to safety?'.

With QE3 i could possibly imagine any currency whose policy is to NOT weaken thier dollar being the flight to safety. I hope i'm wrong but economic instabilty could mean a strengthening of the AUD due to our fiscal policy of not weakening our dollar.
 
thatguy said:
The Accountant said:
I've been stacking Au for some time now and have seen the spot in AUD flatline for last twelve months as AUD has appreciated against USD. In the event of another major economic scism, I expect the same old thing to happen - demand for resources dries up - AUD is seen as volatile and speculative and carry trade collapses, fiat repatriated to yen, USD, Euro etc and AUD falls 20-30%. This should playout to a pretty good interim profit take position.
Click to expand...
This is very logical and is certainly in my thinking...BUT the question I ask myself and hopefully you ask youself is, 'How much fiat does the US have to print before it no longer becomes a flight to safety?'.

With QE3 i could possibly imagine any currency whose policy is to NOT weaken thier dollar beling the flight to safety. I hope i'm wrong but economic instabilty could mean a strengthening of the AUD due to our fiscal policy of not weakening our dollar.
Click to expand...

This is a real problem for all Au investors - if AUD does hold in the face of a fiat collapse then our Au gains will be muted.

I still believe that the small size of our market in Global terms, together with our relatively high interest rate regime (prone to fall in recession) will see our currency retreat against USD in an economic retracement in all but all but Armagedon type playout. Don't forget that the Chinese have a massive interest in seeing the USD supported - any USD melt down would smash them and then turn into absence of commodities demand and hence AUD weakness. I think we are heading to uncharted waters and in this space PM's perform well regardless of ultimate currency play.
 
I've long been of the opinion that the United States is a fading empire. It will go out with a whimper rather than a bang and that might take 10-20-30 years.

Over that kind of time frame, any panics/downturns/negativity in world markets will see less and less money flowing to the "safety" of the USD. In fact, the USD might well be what people start fleeing from rather than fleeing to. The GFC was really the first time the Euro got caught in a major downturn and the European community has learnt a lot of lessons from it. I expect they will continue to tighten regulations to prevent the kind of situation with the PIIGS from occurring again (or at least to a lesser extent) because Germany won't keep bailing out basket case economies indefinitely. If Europe becomes a safer place for capital, a lot of it will end up moving there when things get tough.

At the moment, China is the United States' banker and Australia is China's mine. Since the bank always (well, usually) wins, I see a falling USD as leverage for China to get concessions from the United States in other areas, rather than just something that hurts China's investments in the USD. They're not going to just sit back and say "Oh bugger, our US dollars aren't worth as much"; they're going to sit up and say "Right, you screwed us by devaluing your currency and now we want to buy some major America companies in the following industries..."

A falling USD will hit China, but it won't hit them that hard and at the end of the day, Australia still produces useful stuff. At the moment, China is stacking precious metals like crazy and that will give them a buffer against a falling USD and RMB inflation (to some extent anyway), so copying what China is doing probably isn't the dumbest idea in the world since our economy and currency is so closely link to theirs.

I'm fine with seeing gold flatline in AUD - it validates the idea of gold being a defensive, conservative asset. Silver is, I think, just as volatile as it always was and its still swinging 5%+ per day like it was a few years ago. In that respect silver is a risky conservative asset. I think the key strategy is to trade silver for gold when you can't stand the risk in silver any longer.
 
THe USD as safehaven idea.
Part of the reason the USD rises in gfc is that its the international currency of trade.
To buy or sell overseas large amount of stuff(e.g.10 billion tons of iron ore)you have to first buy American dollars.
When there is a crisis people don't buy and sell and the money stays in USD.
So there is a big demand for USD and it goes up.
So it not just people thinking USD is a safehaven,its an artifact of the way international trade is done.
So even if USD is in disfavour , it will still go up in crisis.


Certainly we have to stop reading American Gold and Silver articles and think they are referring directly to the Australian market.
If Gold rises in USD and falls in Aud , and we have to cash out in AUD,what good is that to us.
Far better to invest in something else.
How do we translate the PM markets into Aussi terms?
This is the most important thing for us to work out.
At the moment AUD rises with gold muting any gain.
Probably they will fall together to mute any loss.
I'm with BIGAD that this is how gold should work,especially in dangerous unstable
Economic times like todays times.
Gold an insurance,not a gambling chip.

I think the AUD will fall much more than the USD in a crisis : being dependant upon commodities and currency gambling,and the USD being "safehaven",and so
you will get more AUD for your gold.
 
Skyblues said:
It seems the spot price in AUD will follow the spot in USD at close proximity, but till when? AUD/USD will probably remain at least close to parity, and probably stronger, yes this will help with further stacking, however, my question is do you think AUD will end up below or above USD when USD tanks, and to what degree?

The problem is I do not think the USD tanking will be a case of bogan hit&drive, it is rather a case of AIDS, cancer or whatever you wanna imagine, a slow and steady downhill trend...If this will prove correct and AUD will remain relatively strong but close to parity, it's all good, stacking will go on and exit will be relatively easy...If it gets too strong though, it will pose a serious problem for us stackers.

People keep talking only about silver price as if it is an independent variable, this is worrying and people who have known nothing but saving accounts and term deposits are not aware of such aspects...What are your expectations from and views about Ag - AUD?
Click to expand...


I guess these are very difficult questions, not many people attempt to chime in :(
 
Peter said:
THe USD as safehaven idea.
Part of the reason the USD rises in gfc is that its the international currency of trade.
To buy or sell overseas large amount of stuff(e.g.10 billion tons of iron ore)you have to first buy American dollars.
When there is a crisis people don't buy and sell and the money stays in USD.
So there is a big demand for USD and it goes up.
So it not just people thinking USD is a safehaven,its an artifact of the way international trade is done.
So even if USD is in disfavour , it will still go up in crisis.


Certainly we have to stop reading American Gold and Silver articles and think they are referring directly to the Australian market.
If Gold rises in USD and falls in Aud , and we have to cash out in AUD,what good is that to us.
Far better to invest in something else.
How do we translate the PM markets into Aussi terms?
This is the most important thing for us to work out.
At the moment AUD rises with gold muting any gain.
Probably they will fall together to mute any loss.
I'm with BIGAD that this is how gold should work,especially in dangerous unstable
Economic times like todays times.
Gold an insurance,not a gambling chip.

I think the AUD will fall much more than the USD in a crisis : being dependant upon commodities and currency gambling,and the USD being "safehaven",and so
you will get more AUD for your gold.
Click to expand...



Bolded my favourite bits but the whole post is Gold (no pun intended...... nah it was intended :P)
 
I think the easiest way to think about this is in terms of Chinese savings. If the USD crashes, the chinese foreign currency reserves of US dollars ($1.1T) will crash, reducing the chinese purchasing power significantly, impacting their ability to continue purchasing Australian resources which will do what to the value of the AUD?

Not only that, but when the USD crashes, what will the perception of other fiat currencies be and how will the politburo controlled chinese currency be viewed and valued?

I think when the USD crashes and burns, if there is no gold standard in place there will suddenly be a gold standard in place because nothing else will be trusted. Which means a significant re-valuing of the monetary metals of gold and silver.
 
Actually, this applies to not only China, but all holders of US debt. Here are the holders of US debt that will be effected by a significant devaluing of the USD.

800px-Composition_of_U.S._Long-Term_Treasury_Debt_2005-2010.PNG

Source: Wikipedia - http://en.wikipedia.org/wiki/United_States_public_debt#Foreign_ownership

Edit: Not to mention the US FED itself and all the Treasury debt it has on its balance sheet.
 
honey stacker said:
This is a really good thread. Thanks.
Click to expand...

glad you are enjoying it mate, although it is not receiving as much attention as it should.

Gino, thanks for that, that chart makes it even more obvious that Australia's, as well as the rest of the world's, economic future will depend on the decisions the Chinese will make, and that is worrysome...Because as I shared earlier, the new 5 year plan will focus on creating ways to boost the Chinese middle class...In other words, the upcoming increase in end products in China will only translate into politics that will aim to acquire raw materials as cheap as possible...Modern history of indirect colonisation in the making, the major difference is that Australia, US and the Western world will probably end up in the periphery this time...

All in all, that Aussie who is earning and investing in AUD, and also holding an American passport and living with a Chinese partner is the most advantaged guy in this climate!! :D
 
is anyone avoiding stacking amercian silver eagles etc because the USA economy is expected to tank?
 
Bimbo said:
is anyone avoiding stacking amercian silver eagles etc because the USA economy is expected to tank?
Click to expand...
No I was actually thinking of divesting in ASEs as they are loosely linked to the US Government. But as of yet it is just a thought and they are pretty :)

what the reasoning behind your thinking?
 
I think you'll find that ASE's are real money long after the Fed Reserve Notes are firestarters.
 
I was thinking that 'silver is silver' so that technically it wouldn't make any difference whether you held ASE coins or Kooks for example, but will the association with an imploading economy de-value the ASE?
 
Bimbo said:
I was thinking that 'silver is silver' so that technically it wouldn't make any difference whether you held ASE coins or Kooks for example, but will the association with an imploading economy de-value the ASE?
Click to expand...

Probably increases the value since they won't be minting that many more with a bad economy and riots everywhere ;)
 
Bimbo said:
I was thinking that 'silver is silver' so that technically it wouldn't make any difference whether you held ASE coins or Kooks for example, but will the association with an imploading economy de-value the ASE?
Click to expand...

ASEs are much more well known than kooks, the world's attention will probably be directed at them at a greater rate than other bullion coins, good point to keep in mind nonetheless...
 
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