Here's our summary of key economic events overnight that affect New Zealand with news of a changing of the guard. Countries are moving away from US Treasuries as a core reserve asset, replacing it with gold. At the same time, crypto values including for bitcoin, seem to be fading fast.
But first up today, there was a full dairy auction overnight, one that brought slightly lower overall prices, with the USD index falling -0.6% mainly on -3% lower SMP prices. Milk fat products like AMF, butter and cheddar all rose, offsetting the fall in powder prices. But the NZD has also strengthened, so the result in NZD terms was a -2.0% fall. A pull-back in demand from China is part of this story too.
In the US, they reported a surge in April job openings, their most in 18 months, notably in California and other western states. It is a services related thing, with manufacturing jobs not really participating.
Meanwhile, the US RCM/TIPP economic sentiment survey fell slightly in June from may, but to its lowest in two years.
And the US Logistics Managers Index is showing the full impacts of the current supply-chain disruptions and stockpiling. It held in May at its highest since the pandemic stress period. It is increasing at an increasing rate for inventory costs, warehousing capacity, and freight prices.
In China, we should note that it is wheat harvest season and that they expect a bumper result. At the same time, both Australian and US farmers are hesitating in their plans for wheat as high fertiliser and fuel costs threaten to make the prospects very uncertain.
In the EU and as expected, CPI inflation firmed up to 3.2% in May from 3.0% in April. Their core inflation rose as well. It seems to be only about rising fuel costs at present with the spread wider quite limited. Will the ECB hike its policy rate on June 11? Markets are betting 100% it will.
In Australia, they have slipped into their first trade deficit since 2017 in the March 2026 quarter. Exports of minerals fell (except for gold) while imports of data center equipment surged.
Globally, it is worth noting again that aluminium, zinc, copper and tin are all now either at record highs or at post-pandemic highs.
The UST 10yr yield is now just on 4.46%, down -1 bp from this time yesterday. The key 2-10 yield curve is now at +41 bps (-1 bp). Their 1-5 curve is now at +37 bps (unchanged) and the 3 mth-10yr curve is at +77 bps (also unchanged). The China 10 year bond rate is holding at just under 1.71%. The Japanese 10 year bond yield is down -11 bps at 2.57%. The Australian 10 year bond yield starts today at 4.92%, up +2 bps from yesterday. And the NZ Government 10 year bond rate is up +3 bps at 4.58%.
Wall Street has hesitated today with the S&P500 up just +0.1% but still enough to claim another new record high. The Nasdaq is little-changed. European markets were between Paris's +0.8% and London's +0.3%. Yesterday Tokyo ended down -0.3%. Hong Kong however zooned up +2.5%. Shanghai ended up only +0.4% however, while Singapore was up another strong +1.2%. The ASX200 ended down -0.1%. The NZX50 was down -0.6%.
The price of gold will start today down -US$9 at US$4482/oz. Silver is down -50 USc at just over US$75/oz.
Interestingly, an ECB analysis released overnight has highlighted that after the run-up in the gold price, at the same time as the value of US Treasuries fell, gold was the largest single asset held for 'foreign reserves'. (see Chart 7)
Oil prices are up another +US$2 just under US$93.50/bbl in the US, while the international Brent price is now on US$96/bbl and up +US$1.50. Hormuz remains shut.
The Kiwi dollar is lower from yesterday at this time at 59.2 USc, down -30 bps. Against the Aussie we are down -40 bps at 82.5 AUc. Against the euro we are down -10 bps at just under 51 euro cents. That all means our TWI-5 starts today at just over 62.7 which is down -20 bps from yesterday.
The bitcoin price starts today at just on US$67,464 and down a sharp -5.9% from this time yesterday and falling. Crypto funds are getting excess redemptions at present. Volatility over the past 24 hours has been high at just under +/- 3.5%.
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44 Comments
Bitcoin was 96k on the 15th Jan and now 66k. If you think the cost of living crisis is bad with 4% annual inflation, if Bitcoin was our currency we would have had 45% inflation in 5 months!
It was 105k a year ago, that’s 60% inflation in a year.
Despite it's ardent fans, it was clear that the only value in crypto currencies was through demand. There are a lot of myths about fiat being used to prop up crypto, and no doubt plenty bought into it. But it was a gamble, even more fraught than the share markets. How much did Musk put into Bitcoin, at what cost and how much has he made or lost now? A quick google search suggests he's lost $307 million, but most of his companies hold stocks bought at around $35K so they haven't lost - yet. Time to bail?
Happy I didn't buy any, especially at $126K!
It’s the new fad these days; you only invest in something because everyone else is, not because of its underlying value. I feel gold is going the same way; some invested for genuine reasons (safe haven), that pushed prices up, then the hoards followed. When the global economy recovers (impossible I hear you say, we’ll see), gold prices will plummet and the later investors will lose a fortune.
You're part-way there.
Just remember that fiat-issued debt - any currency - is also only faith-backed. From your 'price' comments, you are still steeped in the idea that 'money is a store of wealth' - .your 'price' is presumably in fiat-issued $, right? What makes you believe in that, vs anything else?
Fiat is only supported by people - like apparently you - believing in its 'underlying value'. Which is increasingly arbitrary. Yet so many don't see that, presumably driven by a need to self-justify.
I have a feeling fiat currency is state-backed. As in 'Fiat!' That's how it differs from crypto and stablecoins. Sure, a currency crumbles when its fiating state goes crazy with the printing press, but that's different from crypto, conjured out of nothing, backed only by avarice.
"Fiat is only supported by people believing in its 'underlying value'."
PDK you're perpetuating one of the myths put out by the crypto crowd. FIAT is backed by real physical assets and less physical stuff too. Because FIAT is issued by a government, it is supported by all the economic assets of that government, as well as the quality of the government and the overall impact of that on the nation. This means that the NZ$ is backed by all the economic activity that occurs in NZ, and is affected by the direction and quality of what that produces. This also includes the quality and impacts of all the regulation and legislation that is in place too.
That is not 'belief' but rather real quantifiable and qualifiable assets with measurable value.
No, it isn't. Indeed, can't be. It is levered, for starters - that by definition is very clearly not 'backed'.
And that's in the region of 1:5 if I remember correctly, 'backing'to proxy.
Then there is the little matter of the backing fraction: What is that on-the-line house REALLY worth? That too, is nominal (and in my book, already OOM inflated.
Then the final question: measurable in what?????????????? The same fiat?
You I regard as a better thinker than most - come on, think it through.
The value is floating which ultimately means that it is set by the overall assessment of all those who would seek to buy some of the currency. But that in reality is a diversion. The NZ$ true value is based on what it will buy you in NZ.
There are distortions, one of which is external demand and comparison to other currencies. Plus the whole measure is very complex, but in the end the FIAT NZ$ is backed and supported by the government of this country, it's owner on behalf of the people, and all the economic assets operating in the country at the behest of the government.
The lens you're looking through is coloured by scarce resources, and that distorts your perspective resulting in what I argue is a false perception. But the government is the regulatory and legislative authority of NZ. It sets the laws and regulations which allows, supports and guides business activity in NZ. It also owns assets upon which that economic activity operates. That governance is the support and backing that sets the value of the NZ$ and is the same in any country. The size, efficiency and effectiveness of NZs economy is a consequence of our government's role and responsibilities.
With all due respect - bollocks
:)
That's not an argument, but suggests you cannot explain in simple terms your perspective.
No - it suggests that I did, that you didn't get it, that I got why you didn't get it and gave up trying because you weren't going to get it.
Been there a million times.
You did the usual thing too - started off by essentially saying I'm wrong.
Then, on the basis of that, argued that fiat proxy was valid.
Good luck with that approach, but I prefer logic. This is a finite planet. We've mined half of it, in rough terms. The best half. Somewhere south of 2 billion of us got the benefit of that - 6 billion aren't allowed inside the tent. Yet they too, are drawing down the global account. In recent decades, our sub-echelon has tried to bolster it's levered proxy by upping the 'value' of it's existing (decaying) real estate fleet. Then it has essentially bluffed others into accepting a lesser proxy, to make and do for us (usually overseas but increasingly bringing in cheap labour).
There are two things wrong with that - the moral wrongness of the degree of slavery we live atop, for one. The other is that the global - and local - issuance of proxy for the remaining planet, is being issued without reference to the remaining planet, by people who have chosen to ignore the fact that it has half-gone. I regard them either as fools, or as being so steeped in the mantra - and probably so established in a lifestyle/status which required the mantra to be so - that they need to deny.
Go well.
Even without physical resources such as minerals, and economy still functions. There's labour, time and so on. Governmental protections are required. Assuming we're still surviving when all the minerals are gone, and there is still a society, people will still trade for food, livestock, labour etc. One of the trading mediums will likely be a form of currency issued by a government. This has been happening for millenia PDK. Oil and minerals weren't valuable resources (except perhaps jewels) 2000 odd years ago, but economies still functioned. Greeks and Romans issued their own currencies, sometimes just backed with the strength of their armies, but still backed and supported.
Not saying they weren't.
Where are they now? Every one.
The problem is that we currently 'hold' more proxy for 'parts of the planet' - than there is remaining planet. There has never been a global human overshoot before, and it would be almost impossible for our species to pull it off twice. This is a unique situation; don't conflate it with muscle-energised societies of a few hundred thousand, overrunning the local resource-base. The lessons are real; the scale is anything but.
I'm curious Murray, if money is backed by physical assets, why doesn't it hold it's value?
It's a question I've asked many times. Before 1971 Bretton Woods a currency value did not change unless the value of the gold reserves varied. Take away the gold standard and the issue becomes very complex. On one level most physical assets degrade with time. But the real fly in the ointment is inflation. Inflation is baked in through economic theory based on an economic perspective of scarce resources. I don't accept the theory, but most do.
Economies grow, necessitating governments to print more money to support that, thus as a portion of the economy $1 could be seen as fixed if the economy was static. But with growing economies that portion diminishes in relation to the whole, but does that mean $1 worth of goods remains the same? Demand has a perspective and perhaps dominates the entire picture. Don't forget politics. As many have indicated on this site, a lot of investments expect and requires inflation to devalue the $. Overall though it is a complex question that is not easily answered.
Seems money isn't tethered to anything physical, only faith. What it'll buy one day, the next day it'll not, like a litre of petrol. The love affair with the dollar is very ethereal. As an individual you are forced to have faith in it, because everyone else does. Works til the debasement(printing) reaches a certain level, e.g. Argentina.
It's mostly politics, and yes you have a government that doesn't understand the risks and big problems can occur.
My belief is that, considering that the government can generate all the money it needs for it's spending, all government spending should be underwritten by Cost - Benefit analyses. While things like health, education, police, fire Corrections, defence can be argued as easily justified, I'd suggest that not with a bottomless pit of money. Constraint is still required. There has to be efficiencies and effectiveness. Taxation serves a different purpose; controlling the total amount of money in circulation primarily thus protecting the value of the currency, but also influencing how it is applied and used, limiting profiteering and greed, promoting employment and living standards and so on. this is a simplistic vision here, but I believe it to be achievable with the right structure.
Guess spending is always more popular than taxation. The magic money tree is popular mythology. Too many people not pulling their weight in society and a whole industry funding them. Perhaps it's part of human nature we're just stuck with? The easier the living is, the less individuals could be bothered taking responsibility?
Limiting profiteering? Good in theory, but as growthism has shifted further up the exponential curve, corporate capture of our society is tightening it's grip. Once the tech oligarchs armed with AI have consolidated their own "truth", there'll be no going back.
There is more to life than a cost/benefit analysis though. There's always a benefit in asset stripping/extracting/polluting today, especially when those yet to be born bear the costs.
I understand and largely agree with your musings.
Those deferred costs though? They still have to be considered. A big bank balance is no good when you're in a coffin, and how flash that coffin is won't matter. Poisoning the planet for future generations, that's an ethical question that should be considered in a C-B analysis.
Limiting profiteering is to ensure that everybody is paying fair prices (defining 'fair' might be a challenge) and making the economy work.
Yes. The government can "create" spending money.
But ya know. Still costs ya. Comes round to bit ya bum.
That's the other bit of the equation the spruikers neglect to explain
A big bank balance is no good when you're in a coffin
Something too many don't seem to get in this world, and insatiably hoard as much as they can. The question being why is it no good if you're dead? The reason of course is that if you are not able to trade your dollars for goods and services then you are not benefitting from this, and thus any value is moot. But the goods and services need to be there to trade for, and the services need to have the resources required to be carried out.
Cost/benefit analysis would presumably include maintenance cost for the life of the proposal?
Governments don't want currency to hold its value, fearing that would remove the incentive to spend, so stifle commerce. Hence engineering inflation between 1% and 3%.
Governments tend to wish to optimise their currency in relation to their trading partners....the problem is in the execution (and competition)...not to mention identifying the target demographic/cohort.
Also, Space X will IPO at nearly $3 TRILLION NZD.
TRILLION
And a couple of AI shops will IPO at $1 TRILLION each.
Sounds like a lot of NZ KiwiSaver funds will ape in via indexing.
The whole system is broke, but maybe BTC is one of the less broken parts of it
The US and worlds greatest welfare queen needs more cash for his planetary objectives. Where's DOGE when you need it?
Let the retail investors pile in, then eye up the Puts
Ir appears not to be a case of 'let' rather more 'force'.
JJ: Some days ago you did call it being in the sixes this week.
Gold resurgent at US trearuries expense
I don't understand this main headline, when the price of Gold actually dipped and the UST yields also went down overnight. Surely, DC, to justify this headline, Gold would have to rise and US bonds would have to drop (meaning yields would have to rise rise)
Countries are moving away from US Treasuries as a core reserve asset, replacing it with gold.
Is this meant to be a comment about a general trend over time perhaps, just not true for today's news?
It actually links to the crypto thing, doesn't it?
Everyone - elite, governments, Ma and Pa, even struggle street - are aiming to preserve their buying-power (at the bottom end for existential reasons, further up more for status).
Buying of what? is the obvious question. And what are the trends of those whats?
Out of bonds into gold? Out of gold into crypto? Out of all into local fiat? They all eventually expect to buy some what.
Of which there is less, daily. So we are seeing an increasingly frenetic game of musical chairs - some of which are illusions and actually have no legs. But if you end up sitting on one - say NZ fiat - you need to believe it will hold you up. Military force influenced some of that belief, for the last few decades; the $$$ of the dominant hegemony was regarded as 'gold'. No longer, increasingly. But the new belief-narrative is not clear or cohesive - and more than one cohort want to claim that space. While things rumble on, I'd back the yuan as likely winner (not that I've ever invested any proxy in anything other than physical materials).
Ultimately, small players tend to realise that physical possession of material assets is the best move, just before the elites run the enclosures and divest them of same.
But yes, it is reasonable that US debt - in the light of the current administration and likely trajectory - is becoming increasingly less-valued.
"Ultimately, small players tend to realise that physical possession of material assets is the best move"
Then Gold becomes your answer. Yes, oil and food are even more important, but they are not very useful for trading, oil needs to be processed and food perishes over time.
It's a headline Yvil, not an in depth exposee. The ongoing trend of countries ditching US treasuries is hardly new.
"It's a headline Yvil, not an in depth exposee"
Yes, it's the main headline. I think it's a shame if Interest falls into the "clickbait main headline" trap, without expanding on it, in the article.
All commercial media falls into the 'breathless drama happening NOW' trap.
Second only to the 'ratings' trap - where popularity trumps truth and therefore gets more airplay.
Which is why the best journalists globally, tend to end up independent, and tend to write deeper tomes - usually books and often long - about specific theatres or incidents. Which less folk bother to read.
Aye, there it is in a nutshell. The ability to easily flash a communication in seconds from one side of the world to the other, has with that excellent convenience, removed largely the inconvenience of requisite thought to the point that the fact or instance of being the author of the message is in itself more important than the worthiness of the message, itself. Resultantly some of the headline grabbing efforts are outstandingly dumb, inaccurate, pointless and what context follows, usually worse. Yes there is still good, valuable stuff out there but you have to know where to look.
So, you're saying that being the author of the message is more important than its content ?
Not always of course, but nonetheless, far too often. As an aside when I worked in a trading in the early 60’s it had a code department, two telex machines, one inward, one outward. The manager was ex WW2 RNZAF 75 Squadron, a radio operator. Have never forgotten his instruction that the value and effectiveness of your message is not in how you write it, but in how it is read.
the value and effectiveness of your message is not in how you write it, but in how it is read.
Oh that's good. Might even add that to the quote selection beside by desk.
Bernays worked that out a while back...
Well I have tried very hard to follow the advice, but not always successfully as some of my lacking efforts on here evidence.
Bernard Shaw. The single biggest problem in communication is the illusion that it has taken place.
Yvil:
It is there because I thought the most interesting item in today's review was Chart 7 in the ECB report I linked to.
Thanks for pointing this out. It's a great chart indeed, from end of 2023 to end of 2025 it shows that US treasuries and other dollar reserves fell from 50% to 42%, whereas Gold reserves increased from 16% to 27%.
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