Gold’s Price Performance: Beyond The US Dollar

The comments below are an edited and abridged synopsis of an article by Ronan Manley

Much of the recent commentary on gold has been focused on the fact that the (US dollar) gold price has moved lower. Gold has fallen approximately 3.8% over the last 6 months to around $1,250, a drop of $50.

Since gold (or rather, synthetic gold and derivatives) is traded in US dollars, and since much of the financial media tends to be US-centric, the fixation with the US dollar price of gold is not surprising. However, it’s not the full story, because in some major national currencies as well as in cryptocurrencies, the gold price has moved higher year-to-date.

From the perspective of an investment bank forex trading desk, the varied movements of gold prices across a range of currencies are not surprising. Currency prices (including gold) are constantly moving against one another, creating these exchange rates. What’s important to forex traders is the relative strength of currencies and of gold.

The gold price, measured in any currency that has weakened more in percentage terms against the US dollar than the US dollar gold price has weakened, will now be higher in those currencies.

For those with a base currency other than US dollars, or whose wealth or earning power is denominated in currencies other than US dollars, it’s important to keep track of the relative strength/weakness of one’s base currency, and at the same time look beyond the financial media’s headlines and monitor the gold price in that base currency/home currency.

Manley discusses gold’s performance in Brazilian real, Swedish krona, Russian rubles, Indian rupees, and Bitcoin.