Nothing works like gold when you need to hedge against your own currency...
WEDNESDAY'S NEWS that, at last, Standard & Poor's has caught up
with the bond market - and the steady trickle of fleeing bank deposits - by
downgrading Spanish debt had a marked effect on the Euro.
So did Tuesday's downgrade to "junk status" of Greece's government bonds.
And the cut to Portugal's credit rating, too.
It all had a marked effect on gold as
well, not least versus the Euro, but also against the US Dollar and Japanese
Yen - apparently the only beneficiaries of "Ebola
contagion" in Europe...
This week's action "demonstrates gold's ability to protect investors from
crises that debase their own currency, but not those of other sovereign issuers," reckons
Patrick Artus at French bank Natixis.
Investors seeking protection against the debasement of other currencies than
their own are being just plain greedy, however, in our humble estimation. The
4-month high in Dollar gold
prices should be enough for anyone trying to hide from Greek contagion,
especially if they don't share Greece's currency. More to the point, and coming
just after Italy's foreign minister called the Greek bail-out "a
rescue for all of us", the mid-week contagion proves once again that nothing
works like gold when you need to hedge against your own currency.
One third of gold's 38% rise vs. the Euro since the start of 2009 has come
thanks to the single currency's fall on the forex market. But that only just
brings the single currency's drop against gold into line with the Dollar's
1, 3 and 5-year performance, however.
Gold % Gain
USD
GBP
EUR
1 year
27.7
22.4
27.5
3 years
73.1
127.7
79.0
5 years
168.1
236.2
163.1
10 years
321.6
338.3
195.1
Even trading down to €28,760 per kilo of gold, in short - that "barbarous
relic" thrown over in favor of Europe's post-historical unity 10 years ago
- the Euro has still got a lot of long-term devaluation to go.
No doubt it will get it as well - good and proper - whichever way Germany's
politicians jump.
Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold today vaulted
in Zurich on $3 spreads and 0.8% dealing fees.
About BullionVault
BullionVault is the secure, low-cost
gold and silver exchange for private investors. It enables you to buy and sell
professional-grade bullion at live prices online, storing your physical property
in market-accredited, non-bank vaults in London, New York and Zurich.
By February 2011, less than six years after launch, more than 21,000 people
from 97 countries used BullionVault,
owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical
silver (US$129m) as their outright property. There is no minimum investment
and users can deal as little as one gram at a time. Each user's unique holding
is proven, each day, by the public reconciliation of client property with formal
bullion-market bar lists.
BullionVault is a full member of
professional trade body the London Bullion Market Association (LBMA). Its innovative
online platform was recognized in 2009 by the UK's prestigious Queen's Awards
for Enterprise. In June 2010, the gold industry's key market-development body
the World Gold Council (www.gold.org) joined
with the internet and technology fund Augmentum Capital, which is backed by
the London listed Rothschild Investment Trust (RIT Capital Partners), in making
an $18.8 million (£12.5m) investment in the business.
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