Gold values in other currencies may point the way.
AUGUST 25, 2019
AUTHOR: DAN PEMBLETON
Perhaps you have noticed, perhaps not, but Gold has been increasing in price recently. It’s okay if you missed it, watching prices of things like that is my job. Gold is traded in US dollars so the price you have been seeing is in USD per ounce. The gold price has recently broken out of a trading range that had a top price of $1350.00/ounce. Since moving above $1350.00 it has quickly climbed to $1503.00 on Friday August 23rd. That is a very powerful move. Some of the drivers of the price I have talked about in previous Two Minute Updates so I will not re-hash them here.
The USD price of gold is not the whole story. Another way to look at gold prices is through currencies other than the USD. This is a revealing way to look at gold and other asset prices because it removes the price action of the USD from the gold price and therefore you can see how gold prices appear to investors whose primary currency is not the USD. These prices can perhaps reveal more subtle, or at least less talked about, price moves than just one single-currency lens.
Using monthly averages for pricing, we see gold hitting all-time highs in August (the month isn’t over yet as this is written) in many currencies such as (there are many others of course, I just choose these as significant global currencies where gold is making new highs):
Canada: $1980
British Pounds: £1229
Japanese Yen: ¥158,000
New Zealand Dollars: $2312
Australian Dollars: $2200
British Pounds: £1229
Japanese Yen: ¥158,000
New Zealand Dollars: $2312
Australian Dollars: $2200
What this means for the above currencies is gold has appreciated against those individual currencies to an all-time high. Taken inversely, which is perhaps a more correct view since gold has a more stable supply than currencies which can be printed arbitrarily, the above currencies have depreciated relative to gold. The reason I have gone through this exercise is to explore the strength and stage of the gold bull market. In order to have a strong multi-year bull market, gold needs to be moving higher against most currencies. We are not quite there yet, so we are in the very early stages of a bull market. Major currencies where gold is not making news highs yet (as of the writing of this on August 25th) are US Dollars, Swiss Francs, European Euros, Chinese Renminbi. For these remaining currencies (there are others of course, I have just chosen these for their significance in global trade and investing) new highs are relatively close particularly the Euro which could make a new high any day.
As gold makes a new high against each remaining major currency, it will add more reinforcement to the currently quiet but growing commentary around the strength of gold and the weakness of currencies.
Gold’s appreciation relative to currencies is not really a new phenomenon, currencies have been steadily depreciating against hard assets like gold since fiat currencies were invented. However, it is these periods of rapid depreciation that provide the best returns to gold and gold miners. Based on the early indications of the Canadian, British, Japanese etc. currencies and the returns we are already seeing with gold and gold equities, it appears a period of rapid depreciation of currencies and appreciation of gold and precious metals is upon us.
