Gold News

Gold vs. Non-US Money

How the Gold Price has performed in five of the world's most important gold markets...

WHY ARE INDIAN GOLD BUYERS moving to buy gold when the price is falling? asks Julian Phillips of the

The short response to such a question is that they aren't. They are Buying Gold in Rupees, which makes the value of gold more stable over recent months even as the Gold Price fell in the US Dollar.

That's because the Rupee is falling, and so gold has appeared to hold steadier in the Rupee. Indians see the Rupee as a problem (and rightly so), there is even more incentive to Buy Gold for the security of their daughters as they enter marriage. But we should also look at other currencies where gold has done its job of holding up when local equity markets have fallen.

In the Eurozone, for example, recent weeks have seen the Euro fall from $1.60 to the present $1.25 – a fall of 22%. Yes, this has accompanied a sharp fall in the US Dollar price of gold, down from $900 to $700 for another fall 22%. However, look at this other way. In the Euro, gold has remained steady above €560 an ounce.

Four of the other most important gold markets in the world are India, South Africa, Canada and Australia, and in recent weeks all four of these currencies have fallen as the Dollar rose. Prior to the global credit crisis, all four countries had been the darlings of the "carry trade" – that no-brainer investment strategy where cheap money was borrowed at cheap rates in the United States or Japan, ready to invest in these higher interest-paying currencies.

But now...

  • In India the Rupee has fallen from Rs.40 to nearly Rs.50 per Dollar, a 25% fall;
  • In South Africa the Rand has fallen from R7 to R11.5 per Dollar for a 64% fall;
  • In Canada the 'Loonie' has fallen from C$0.98 to C$1.27 to the USD, a near 30% fall;
  • In Australia the AUD has fallen from A$1.00 to A$1.57 per greenback, a 57% fall.

Just consider how far the Gold Price in the Dollar has fallen since these currencies were at their highs, and you can see how investors the world over have benefited from Gold Investment amid the collapse of their previously strong moneys.

For India, the largest single gold-buying nation, gold has also held steady in the days before the important festival of lights, Diwalis. In the remaining three countries surveyed above – all gold-producing countries as it happens – Gold Miners are encouraged by their local currency price of gold, since it is the price in which they are paid.

In all those countries then, gold is providing that wealth-retaining role that is expected of it. And that is in a market where the Dollar Gold Price is falling very sharply and could – I believe – soon recover. Imagine a recovery back to over $1,050 and you have an additional 50% rise in these non-US numbers. Of course, here at the, we have to qualify this and say that we do expect these currencies to appreciate as gold rises.

Nevertheless, gold would perform wonderfully in this event. Once the rise in the Dollar is complete as the panic to repay US-owed debt recedes – and is met by increasing Federal Reserve supplies of cash – expect the Gold Price to rise once more, and show again how gold makes a great investment when confidence in official currencies collapses.

JULIAN PHILLIPS – one half of the highly respected team at – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

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