Gold News

Pricing Deflation in Aussies Per Oz

Unlike the Australian Dollar, gold pays less interest than even the US Dollar or Japanese Yen...


IF GROWING INFLATION
is our future, then a likely-looking bolt-hole for retained capital must be the Australian Dollar.

Offering the strongest developed-world interest rates since long before the global financial crisis, the Aussie's exchange rate maps investor sentiment towards the "commodity super-cycle" theory, thanks most of all to Australia feeding China's fast-growing appetite for raw materials.

But the Aussie Dollar also points, therefore, to investor fears of deflation – most spectacularly in its currency cross with gold bullion...

Unlike the Aussie, gold pays no interest. It has little industrial use, finding economic value instead in its social use of storing value when other, more growth-reliant investments fail.

And yet, as our Gold Price chart shows, gold has just signalled a huge swing in sentiment...away from the commodity market's super-rally of mid-to-late 2009...and back towards the meltdown fears of fall/winter 2008.

Yes, a bust in Australia's consumer-credit and housing bubbles looks long overdue. Yes, the Rudd government's mining-tax blunder has weighed on the Aussie as well. But gold's rapid recovery in AUD per oz – up some 27% from start-March to within a few bucks of last year's record spike – comes even as the Reserve Bank raised its cash rates three months running, up from 3.75% to 4.50%.

The threat of Eurozone (if not broader) defaults trumped rising rates, in short, as well as what the RBA calls an "unprecedented" boom in commodity exports.

That'll be gold rising on deflationary fears, then, just as it did during the Great Depression and again at the start of 2009.

How best to buy gold today? "If there's an easier way, I've yet to find it," says one Bullion Vault user...

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are 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. Please review our Terms & Conditions for accessing Gold News.

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