The gold price
Gold in Not Dollars - 16 November 2009
"THE DOLLAR is still driving gold," agree the analysts, pundits and chart-watchers now scratching their heads about where gold is headed next.
That's kind of true, but not entirely. Yes, the Dollar's fall against gold since the start of this decade has been greater than the drop suffered to date by the rest of the world's currencies.
But the last 20% move in Dollar gold prices, for instance – starting from the mid-July low – has been outpaced by gold adjusted for the greenback's fluctuating currency value, as measured by the US Dollar Index.
Priced in these "Not Dollars", Gold has risen 26% since midsummer, as this chart (gold for the Dollar price, blue for the adjusted value, and both starting from Jan. 2000 values) shows.
The reverse is true of the US stock market's big surge, however, because it started when the Dollar was stronger and set to weaken – rather than the tepid rally it's put in so far this fall.
Priced in Not Dollars, the S&P has risen by a lower percentage from the March bottom – up 39% – than its USD value.
In fact, almost one-quarter of the S&P's bounce to date could, if you so wished, be attributed to the weaker Dollar. Non-US investors have failed to enjoy the same rally as Wall Street. Whereas in Gold, since it turned sharply higher, they've outperformed – on average – to date.
Just a thought.
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Adrian Ash runs the research desk at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications.
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