Gold bullion surging in all currencies

I argued the bull case for gold in my posts over the past few months (see “Gold bullion – regaining its shine?“, “Gold bullion glitters bright” and “Gold bullion – challenging $1,000“. With the gold price scaling fresh peaks and closing in on $1,100, it would certainly seem as if renewed interest in the yellow metal is being stirred up, especially subsequent to the purchase by India’s central bank of 200 metric tons of gold from the International Monetary Fund.

As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history – and the US greenback is heading South – the longer-term fundamental case for the yellow metal is arguably positive.

“The gold bug has caught several big hedge fund managers this year including John Paulson of Paulson & Company, Kyle Bass of Hayman Advisors and David Einhorn of Greenlight Capital, who believe enormous monetary and fiscal stimulus that has been injected into the global economy will eventually result in hyperinflation,” said The New York Times.

The gold price is not only making headway in US dollar terms, but also in most major (and minor) currencies as illustrated by the table and graph below. This is a manifestation of increased investment demand, whereas the initial rise in the gold price from its low in 2001 ($250) was mostly a reflection of US dollar weakness.

gold5111
snap2

Illustrating the message even more vividly, is the chart below of gold expressed in a basket of emerging-market currencies by dividing the dollar bullion price by the Wisdom Tree Dreyfus Emerging Currency ETF (CEW).

gold511c

Source: StockCharts.com

The shorter-term technical picture is also looking interesting. This is explained by Adam Hewison of INO.com who prepared a short technical analysis of gold’s most likely direction and key chart levels. Click here to access the video presentation.

Seasonally, the period from November to December has traditional been good for gold, with average gains ranging from more than 1% to almost 2.5% since 1970.

gold511d

Source: Plexus Asset Management

I remain bullish on gold in the medium term, especially as I believe the vast money printing by central banks could set off strong inflation pressures down the road. I will not be surprised to see bullion remaining in a secular uptrend in the medium term. Add bullion to your portfolios, but given the notorious volatility of the metal only do so on pullbacks.

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Category: Think Tank

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8 Responses to “Gold bullion surging in all currencies”

  1. Lord Blankfiend says:

    We have gold leaf on all the bathroom fixtures here at 85 Broad. Want to buy some?

  2. davossherman@gmail.com says:

    Gold, the other currency. The septic tank is getting clogged as some 24 nations circle the drain, masking the fall of many Fiat currencies since we compare one to another.

    Way to go Bernake, Congress, Geithner, Paulson, Rubin, Greenspan. 80++ trillion in debt. How Havard boys made a Zimbabwe dollar.

  3. emmanuel117 says:

    $, pound, yen, yuan, dinar, rupee.

    QE, yuan peg, petrodollars. All ONE TRADE, kids.

  4. Brendan says:

    Yup, fiat currency is clearly dead; we’ll all be walking around with bags of gold dust any day now. Gonna’ need some really accurate scales to pay for a $5 latte though (that work out to, about 140 miligrams of gold @$1100/troy ounce)! Forget investing in gold, I should invest in lab grade scales, since every shop’s gonna need one soon. :roll eyes:

  5. this: “As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history – and the US greenback is heading South – the longer-term fundamental case for the yellow metal is arguably positive.”
    –PdP, above

    Highlights what I never understood about the ‘Deflationists’ POV..

    LSS: they act like the ‘dollar’, or any other, current, Currency, isn’t hypothecated from thin-air..

    with that, many forget that Price is a Ratio, and, as the denominator falls, apparent Price goes Up.

    Lastly, I’m surprised, in light of the factual underpinnings of our current schema, that more peep aren’t noting/delineating/’arguing’ the case of targeted ‘deflation’ with, concurrent, selective ‘inflation’..

    It’s, now, more than ever, a PoliSci-Fi ‘Economy’ we’re (sleep-)walking through..be “LinkedIn”, or carry the weight of the “Chain(g)”, and hope that you’re left with some to buy that Latte..

  6. Pat G. says:

    “The gold price is not only making headway in US dollar terms, but also in most major (and minor) currencies as illustrated by the table and graph below.”

    This proves that the rise in gold is not merely speculation. Citizens of many countries are worried about their governments or others attempts to inflate their currencies via the printing press.

  7. wunsacon says:

    >> This proves that the rise in gold is not merely speculation. Citizens of many countries are worried about their governments or others attempts to inflate their currencies via the printing press.

    Or maybe it suggests that gold is in a worldwide bubble?

    (No, I don’t really think so. So, I’ll hold onto my tiny allocation to gold.)

  8. In Prieur du Plessis’s post, substitute the word “housing” or “electronics” or “tulip bulbs” for the word “gold” and you will see something very familiar. Then read: http://rodgermmitchell.wordpress.com/2009/10/28/fools-gold/

    Rodger Malcolm Mitchell