2009-11-16

Gold Is Not At All-Time Highs In Many Other Currencies

USD weakness remains a key driver of the gold price (in US dollar terms). However, when gold is denominated in other currencies, two things become apparent:
  1. Firstly, gold is not at all-time highs in many other currencies, including gold denominated in AUD, CAD, GBP and EUR (to mention only a few). In many currencies, price highs were reached in February this year.
  2. Secondly, while gold is not at all-time highs in some currencies, gold demand is rising steadily, as demonstrated by viewing gold against currencies for different periods.
While there is a clear positive correlation between dollar weakness and the gold price in dollar as expected, there is no correlation between the gold price and many other currencies. Gold has been trading at the same levels for many different values of the CAD. However, what is clear from both figures, is a clear step-change in the gold price irrespective of which currency is used. Gold is trading currently at higher levels in CAD
than it did in 2007, even though the CAD/USD exchange rate is now at similar levels than it was in 2007. Real demand for gold is rising. This is apparent from the adjacent figures.

Most of the investor expect this support to continue well into 2010 as liquidity remains ample. However, they also see downside potential for gold as we head into Q1:10 and seasonal jewellery demand declines.

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