Interest Rates Rise-Gold Falls

There is a connection between interest rates and gold prices. As rates rise, the demand for gold falls.

There are faint stirrings that the worst may over as far as economies around the world are concerned although Europe is still in free fall.   In New Zealand there is the feeling that interest rates are as low as they will ever go, and now may be the time to quietly start fixing low rates for the long term. Just remember what fixing a rate means.  If rates rise further that’s good for you, but should another economic shock arise it may all turn around once more. Maybe fixing half and leaving half floating may be the answer.

Keep your eyes in Europe ( a major customer of NZ exports) as where that economy goes will dictate where our interest rates finally go.

Note: All predictions expire at midnight tonight..



Aggressive mortgage pricing to end as wholesale rates climb; market shifting rapidly to fixed rate deals

February 21, 2013 David Chaston

Westpac have said their three aggressive fixed home loan rate specials will be ending soon.

The current 1, 3 and 5 year fixed rate specials ($100k) will finish at the end of next week on Sunday, March 3.

These ‘special’ rates for the 1, 3 and 5 year terms are 4.89%, 5.39% and 5.75%.

Their standard 1, 3 and 5 year rates of 5.25%, 5.90% & 5.99% will remain unchanged.

Westpac introduced the three ‘special’ rates on Monday, February 11.

This notice comes as wholesale rates continue their creep up affecting the 3 and 5 year terms especially.
Banks are keen to sign homeowners into longer-term fixed rate contracts because customers on variable or short-term rates are vulnerable to poaching by their rivals.

But with the rate curve steepening – that is, with longer term rates rising faster than short-term ones – the attractiveness of banks’ offers to encourage fixing for extended terms diminish.

Homeowners however have been rushing to fix and lock in rates before expected future rises.

To a large extent it is self-fulfilling that rates rise if enough borrowers do switch because wholesale markets react to the pressure. Late movers don’t gain the advantage early movers get.

In addition, booming property prices in many big urban markets also raise the chance the Reserve Bank may need to raise official rates.

Market observers generally expect an OCR rise later in 2013 or early 2014, ‘encouraged’ in this view by recent comments by the Reserve Bank governor.

A rise in the OCR generally flows through to rises in floating and short-term fixed rates. Short-term fixed rates can rise earlier than official rate hikes if money markets start pricing in the expectation.



Gold’s ‘Death Cross’ Isn’t All Investors Are Worried About

20 Feb 2013 |
CNBC Executive News Editor

Gold is flashing the “death cross” but the bearish chart pattern is not the only thing scaring investors.

The magnetic appeal of a rising stock market has pulled some investment funds away from the yellow metal. Since the beginning of the year, stocks are up nearly 7 percent and gold is down nearly 6 percent.

“What’s really behind this is we’ve had three major risks that supported the gold market last year, which was the fiscal cliff; the possibility of Greece leaving the euro and the euro zone crisis and the third was a hard landing in China, and all of those risks have mitigated this year,” said Jim Steel, chief commodities analyst at HSBC. “And I think that has undercut the bullion market


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One thought on “Interest Rates Rise-Gold Falls

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