Unlike the Australian Dollar, gold pays less interest than even the US
Dollar or Japanese Yen...
IF GROWING INFLATION is our future, then a likely-looking bolt-hole
for retained capital must be the Australian Dollar.
Offering the strongest developed-world interest
rates since long before the global financial crisis, the Aussie's exchange
rate maps investor sentiment towards the "commodity super-cycle" theory,
thanks most of all to Australia feeding China's fast-growing appetite for
raw materials.
But the Aussie Dollar also points, therefore, to investor fears of deflation
- most spectacularly in its currency cross with gold
bullion...
Unlike the Aussie, gold pays no interest. It has little industrial use, finding
economic value instead in its social use of storing value when other, more
growth-reliant investments fail.
And yet, as our
chart shows, gold has just signalled a huge swing in sentiment...away
from the commodity market's super-rally of mid-to-late 2009...and back towards
the meltdown fears of fall/winter 2008.
Yes, a bust in Australia's consumer-credit and housing bubbles looks long
overdue. Yes, the Rudd government's mining-tax blunder has weighed on the Aussie
as well. But gold's rapid recovery in AUD per oz - up some 27% from start-March
to within a few bucks of last year's record spike - comes even as the Reserve
Bank raised its cash rates three months running, up from 3.75% to 4.50%.
The threat of Eurozone (if not broader) defaults trumped rising rates, in
short, as well as what the RBA calls an "unprecedented" boom in
commodity exports.
That'll be gold rising on deflationary
fears, then, just as it did during the Great Depression and again at the start
of 2009.
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.
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 must be verified elsewhere - should you choose
to act on it.
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