Precious metals naysayers often fail to keep a global perspective on the economics behind gold and silver. This past week has been a stark reminder that gold is an international asset whose real, fundamental value cannot be found in US dollar terms alone. When the Swiss franc’s peg to the euro was dropped, gold surged against global currencies.
A Kitco commentary by Frank Holmes featuring a variety of currency charts makes the point succinctly. First, here’s gold in euros. Gold is up 14.3% in the past month against the euro. It’s moved nearly 6% since Switzerland decided to abandon the euro.
Priced in Japanese yen, gold is up about 6.3% from a month ago, and half of those gains occurred in the past week.
In Canadian dollars, gold is up 11.4% in the past month. The majority of that rise occurred on the Swiss news.
Holmes makes some other good points to keep in mind as we look ahead into what’s in store for gold in 2015:
- The World Gold Council has partnered with the Shanghai Gold Exchange to create a Shanghai Free Trade Zone that will continue the trend of moving the gold trade from West to East. The US dollar will become less and less important to gold investors.
- When the Swiss National Bank removed the franc’s euro cap, the largest gold ETF in the world experienced 10 metric tons of inflows – the largest in one day since August 2012.
- Even gold speculators have been bullish on the precious metal for seven straight weeks. Looks like the market is starting to wake up.
Peter Schiff commented on these same trends right on the heels of the Swiss news. His main warning to investors is that the US dollar’s relationship to China is even more precarious than the eurozone’s ties to the strong Swiss franc. Click here to watch his analysis in his latest Schiff Report video.
