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One Golden Decade, 13 Decaying Fiat Currencies

Commodities / Gold & Silver 2009 Jan 04, 2010 - 12:56 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleGold up, Dollar down...? Not entirely...

SO THE LAST DECADE of rising gold prices simply mirrored the US Dollar's steady decline. Right...?


Well, no actually, as BullionVault has repeatedly noted...and never less than when clutching a whisky and ginger this past Yuletide...typically to a fast-emptying room.

Gold's tripling-and-more since Tues 4th Jan. 2000 came against all major currencies, let alone the minor ones. In fact, when judged against a truly globalized basket of the globe's truly basket-case currencies – those various monies issued by the top 10 economies in terms of Dollar-GDP – gold turned decisively higher in mid-2001...looking back only a handful of times and never for more than a 20% drop.

All about the Dollar? Don't you believe it.

Yes, volatility and violence rose together as the gold price pushed higher. And yes, the Dollar-price gains outstripped those in the Euro (292% vs. 180%) and commodity-led Canadian Loonie (179%).

But your local fund managers, financial advisors and op-ed pundits would have been hard-put to beat those returns with anything else. And as gold remains (at least in the view of die-hard, gloating and lone-drinking "gold bugs") the only viable one-world currency, it's worth glancing at just how it performed against the last decade's various top 10 monies by economic weight...

Currency Gold's Decade Gain (%)
US Dollar 292
Euro 181
Yen 249
Chinese Yuan 218
UK Pound 298
Brazilian Real 273
South African Rand 365
Canadian Dollar 179
Indian Rupee 313
Mexican Peso 434
Russian Rouble 310
Australian Dollar 182
South Korean Won 299


* NB: The GGI is rebased for the top 10 currencies by economic output each year. The 13 gold-lagging currencies above all made one appearance (or more) in the last decade's data. 2009 positions given here, courtesy of the IMF. The US accounts for 32%, the Eurozone 27%.

Of course, no one much cares for the last 10 years of data, however – not outside the relative performance tables of mutual fund sales teams.

But whether you think gold warned of trouble ahead when it first doubled to the start of 2006...or you feel it merely worked-as-prescribed when it almost doubled again during the financial crisis that then followed...it's clear that the decade of gold just ended was a long way from a "Dollar down" story alone.

And all this without the much-fabled price inflation which newcomer pundits believe is essential for a long-term rise in the gold price. Just imagine what the price might do from here if a true surge in the cost of living now shows up worldwide.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

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