Safe Haven | Gold Priced in the Top 10 World Currencies

"No warning can save a people determined
to grow suddenly rich." - Lord Overstone

HOME

ARCHIVES

FORUMS

SITE MAP

ABOUT US

Home -> Archives -> Adrian Ash -> Gold Priced in the Top 10 World Currencies

Printer Friendly

eMail Article

October 28, 2008

Gold Priced in the Top 10 World Currencies
by Adrian Ash

"...Take a look at this chart of gold prices measured in the top 10 most important world currencies..."

SO the SPOT GOLD PRICE sank in October, dropping right back to 13-month lows at $683 an ounce.

After failing to breach $930, this collapse marked the third step lower from March's all-time high of $1,032. And from a technical perspective, the Gold Chart looks horrible - recording lower lows and lower highs for the last six months and more.

Right? Well, fact is, the action has actually been greatly muted if we allow for the shocking volatility in gold's No.1 competitor for "safe haven" funds, the almighty US Dollar.

You see, like so much else, the market action just described only sets Gold in terms of the greenback (against which it has still tripled since July 1999).

Versus pretty much every other world currency, in contrast, gold in fact enjoyed a banner month this October - delivering gut-wrenching volatility plus new record highs - starting right here in London, home to the world's $60 billion-a-day trade in wholesale Gold Bullion Bars (a.k.a. the "spot market").

Mid-month, gold also leapt to new record highs for Australian, Canadian, Danish, Estonian, Hong Kong, Hungarian, Icelandic, New Zealand, Norwegian, South African, South Korean, Swedish, Turkish and Russian investors.

Oh, and the 350 million souls in the Eurozone. Plus the 1.1 billion people of India.

Gold Prices have of course slipped back - and sharply - against all major currencies since reaching €685 an ounce for European investors and savers on Oct. 10th. (That marked a near-tripling from the low of Jan. 2000.) In the spot market, gold's now trading almost 13% lower as the month-end draws near.

And notable by its absence from the rogues' gallery of fast-sinking currency zones listed above is the Chinese Yuan, as well. More spectacularly, the world-destroying Japanese Yen has squashed the price of gold since turning sharply higher against everything - real estate, global equities, emerging-market debt, even the Tokyo Nikkei - in mid-July.

But if we really are witnessing a global currency crisis led by the destructive reversal of the Yen Carry Trade (and it certainly looks like it from inside a wallet of Sterling or Ne Zealand Dollars, let alone Forints or Krona), then just what kind of fight is gold putting up as the apparent "ultimate" safe-guard against currency shocks?

Regular visitors to this site may recall a chart we offered in August this year, a chart showing the Gold Price in terms of the world's top 10 currencies by economic output. It's not perfect; the GDP weightings for 2008 will need revising, perhaps, when this year's full-year data becomes available early next year.

But as a measure of truly globalized gold prices, it both softens the US Dollar's long slide of 2002-2008 on the currency markets, as well as tempering this month's intemperate highs in gold bullion vs. the Aussie, Loonie, HK Dollar, Forint, Kiwi, Krone, Rand, Won, Lira, Ruble, Euro, Pound Sterling, Rupee and various Kronas.

You can't help but spot the volatility - otherwise known as "My gold just crapped out!"

The way "quant jocks" figure the violence in asset prices, in fact, the daily volatility in this global gold price has more than doubled since August to a three-decade record.

You might also note, however, that gold really has risen sharply against all major world currencies so far this decade, not just the US Dollar. And no one should imagine it will be an easy ride - whether up or down - from here.

There's too much at stake when you try to measure that $60 billion daily turnover in physical gold against the $3.2 trillion daily turnover in official government currencies.

Adrian Ash
BullionVault.com

Head of research at BullionVault.com, the fastest growing gold bullion service online, Adrian Ash is also City correspondent for The Daily Reckoning in London, and a regular contributor to MoneyWeek magazine.

Useful links: FAQs, Gold price now, Public order board, and The Case for Gold

More on BullionVault

BullionVault makes buying gold simple. It buys guaranteed, market deliverable gold bars and stores them at professionally recognized bullion vaults. The actuarial risk of loss is so small that your gold is stored with insurance included at 0.12% per annum.

On BullionVault you buy whatever quantity of gold you like, starting from as little as 1 gram. Choose where to store your gold from recognized vaults in London, New York or Zurich. Your gold will be in the form of good delivery bars, so it will retain full resale value straight back to the professional market.

As a seller at any time in the future, you will benefit by having gold of professional market status. Your top-quality warranted bullion can be offered directly to new buyers on BullionVault's highly active and publicly accessible order board. You can even quote your own prices, meaning you will earn - rather than pay - the trading spread.

For your full security and peace of mind, BullionVault also publishes a complete daily bullion audit in the world, enabling you to safely check your proven holding from an internet computer anywhere, and to prove it to the physical bar list issued to BullionVault by its vault operators.

By April 2007 - just two years after launch - BullionVault was storing for its customers cash and gold amounting to more than $68m.

For further information contact enquiries@BullionVault.com

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events and should be verified elsewhere if you choose to include it in your own analysis.