The Price of Gold in Top 10 Currencies

One thousand dollars doesn't buy what it used to – not for non-US investors.

Back in March 2008, when the gold price first broke $1,000 an ounce, the euro equivalent peaked just shy of €660. Sterling investors here in the UK saw the price touch £515 an ounce.

Both of those figures – like the USD gold price – were then new record highs. But come the next test of $1,000 per ounce in February 2009, the euro price had reached 20% higher to touch €795. The UK value-of-gold peaked 35% above its previous $1,000-equivalent, up at £700 per ounce.

Today, however, and with US gold prices coming within $11 of a third attempt at $1,000 per ounce mid-week, British and Eurozone prices are well off the mark. February's all-time peaks in Euros and Sterling would stand more than 15% higher from here.

All of which shows first, that anti-inflation and crisis insurance just got cheaper for European savers. So second, the $1,000 mark – if reached anytime soon – would be counter to last autumn's dollar-price lows, which came even as non-US gold prices were surging, showing the apparent sell-off to be more a function of the "strong dollar" rather than falling gold investment demand.

Thus third, and most crucially, the volatile value of US dollars continues to grow more volatile still as 2009 unfolds. Which can get in the way of seeing just where gold has been and might head from here.

Hence this chart, updated from Gold vs. the World (July 2008) and showing the price of gold in terms of the 10 largest economies' currencies, weighted and indexed and rebased each year for the top 10 global economies.

Purely notional, of course (and based on nominal GDP weightings, rather than purchasing parity, since spot gold trades internationally, not at markedly different domestic prices) the index strips out the noise of dollar up, dollar down...even while giving the US-dollar gold price a one-third weighting (followed by the euro, yen, yuan, sterling etc. as run off IMF data & estimates) for 2009.

It also shows how this decade's bull market to date mirrored much more than just the decline of the dollar on the forex market, even if the last five weeks' rally has clearly been built on that trend.

Disclosure: Long physical gold bullion.

Comments

[T.Stamps:]

Good article. Hold gold and silver for insurance purposes.

Jun 04 01:01 PM

[Glen Bradford:]

Adrian,

I could use a lift.

Could you reply with a link to some (free) currency charting websites that you use that would enable me to shoot back 5 years in times and look to see how the exchange rates have progressed. Also, what are these top 10 currencies?

Glen

Jun 04 03:13 PM

[Glen Bradford:]

— European Union 18,394,115[4]
1 United States 14,264,600
2 Japan 4,923,761
3 China (PRC) 4,401,614h
4 Germany 3,667,513
5 France 2,865,737
6 United Kingdom 2,674,085
7 Italy 2,313,893
8 Russia 1,676,586
9 Spain 1,611,767
10 Brazil 1,572,839

Those the 10?

Jun 04 03:19 PM

[Glen Bradford:]

Found this:

www.chartflow.com/fx/c...

Nevermind then. I'll take it away.

Jun 04 03:22 PM

[Adrian Ash:]

Glen -- the GDP weightings are changed each year in line with IMF data. So yes, for 2008 those are the numbers used, but with the 16 Euro economies added together to take the No.2 spot. The idea is to refine the World Gold Council's G5 gold index (scroll to the bottom here: www.research.gold.org/... ). Still applies GDP weights from 10 years ago!

Chartflow's a great site, thanks for the link. For major crosses -- live and historic -- hard to beat HIFX:

www.hifx.com/marketwat...

Jun 05 05:17 AM