90 at 9: Milk powder price up 13.7%; Indian central bank buys 200 tonnes of gold

Alex Tarrant presents 90 at 9 in association with ASB. (Watch on You Tube here.) The average whole milk powder price rose 13.7% from October at Fonterra's latest internet auction overnight. Prices are now up 88% from their low in July. This follows news out yesterday that New Zealand's export commodity prices rose 4.6% in US dollar terms in October from September but fell slightly in NZ dollar terms as the NZ$ rose over the month. However, dairy and log prices both rose in NZ$ terms. The NZ dollar fell over the last week of October from just under 76 USc to just over 72 USc now. If it stays at this level and commodity prices keep their recent strength, then November will hopefully be a better month for NZ exporters. The Reserve Bank of Australia yesterday lifted its official cash rate by 25 bps to 3.5%. Finally, Bloomberg reported the Indian Central Bank purchased 200 tonnes of gold from the IMF at the end of October. Gold prices pushed up over US$1,085/ounce in New York this morning.

The Reserve Bank of India paid $6.7 billion for the bullion, which it bought from Oct. 19 to Oct. 30. It was "the biggest single central-bank purchase that we know about for at least 30 years in such a short period," said Timothy Green, the author of "The Ages of Gold." "The only comparable event was the U.S.'s steady purchases in the 1930s and 1940s." Prices also rose to an all-time high in gold traded in Indian rupees. Central banks, the biggest holders of gold, may diversify out of the dollar and buy bullion as ballooning U.S. debt and low interest rates weaken the currency. "It is but a matter of time until China and the IMF announce much of the same," said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia.