SPONSORED CONTENT
Record pump prices and a weak kiwi are repricing gold for New Zealand buyers.
Petrol at the pump is now doing the work that a political slogan usually does.
On Monday 5 October the national average for 91 broke $3.50 a litre, a fraction above the April peak set after the United States and Israel struck Iran, according to Gaspy. Diesel was about $3.22.
Brent crude has been stuck above US$100 a barrel and was quoted around US$101.50.
The New Zealand dollar, near 55.8 US cents and down about 7 per cent since August, turns every imported barrel into a larger local bill.
High oil plus a weak kiwi is why the pump price hurts, ASB’s Kim Mundy said.
That feed-through is how a geopolitical oil shock becomes a household problem. Fuel is in the weekly shop, the courier, the farm and the school run.
It lifts the cost of living before it shows up cleanly in the Consumers Price Index, and once it does, it narrows the Reserve Bank’s room.
A central bank that has been cutting, or waiting, has less scope to ease if petrol is pushing inflation back up.
The risk the electorate feels is a tank of 91 that costs more than it did a month ago, and a diesel bill that has risen faster still.
The general election is on Saturday 7 November.
An electorate paying record pump prices during the campaign is more open to changing the government than one that feels the cost of living easing.
No political party can switch off the Strait of Hormuz, but voters still tend to punish the party in office when the weekly bills rise.
That creates uncertainty, although it is not a forecast of the result. Uncertainty is one more reason the kiwi has been soft.
A weaker kiwi and an unresolved war are the same story told in two markets.
Gold is the asset that usually benefits from political and geopolitical uncertainty and worry.
It pays no interest, but historically demand for it rises when confidence in currencies, governments or shipping lanes slips. That is the condition both offshore and here at home.
In US dollars, gold was about US$4,143 an ounce on 5 October, after a Friday close near US$4,141. That was down roughly 3.4 per cent on the week.
Silver was about US$61 and had a rougher week. It closed Friday near US$60.37, down about 6 per cent.
In New Zealand dollars, gold was still about NZ$7,399 an ounce.
A firmer US dollar and a weaker kiwi mean the local price can hold up, or rise, even when the New York price dips.
The metal has not gone up in both currencies at once this week. It has been repriced by the NZD USD exchange rate.
Buying gold or silver bullion is one way to keep spending power in a form that is not a promise from a bank or a government.
It may not deliver a large percentage gain from here. It also does not go to zero in the way company shares, or an inflationary currency, have done in the past.
A bar is still a bar if the issuer of the paper fails.
Banks and advisers do not suggest gold as the whole portfolio.
The World Gold Council’s work has tested allocations of 2.5 to 10 per cent of an investment portfolio. The figure most often modelled is 5 per cent.
J.P. Morgan’s family-office advisers have suggested 3 to 5 per cent.
A widely cited retail range is 5 to 15 per cent.
Disclaimer: This article is sponsored content supplied by Commonwealth Vault. It is for general information only. It is not financial advice, investment advice, a recommendation, an offer or a solicitation to buy or sell gold or silver from Commonwealth Vault, or to hire or purchase a safety deposit box from Commonwealth Vault. Bullion prices move and you may get back less than you paid. Past performance is not a guide to future results. Prices quoted are approximate, vary between dealers and times, and are affected by the NZD/USD exchange rate. You should consider your own circumstances and obtain independent professional advice before making any decision. Commonwealth Vault and its related companies accept no liability for any loss arising from reliance on this article.
