Gold Breakout: A Vital Perspective

Gold Breakout: A Vital Perspective by Lobo Tiggre for KitCo News

After years of failed attempts to break out of its trading rut, gold finally did, shattering resistance that has held since 2013. Not only that, it breached the “psychologically important” $1,400 level. It looks to be consolidating before heading higher—possibly much, much higher.

But all of this is in US dollar terms. The US has plenty of hard-money advocates, but it’s the Chinese who buy more gold than anyone else.

It’s important to look at gold from an international perspective. Here’s a chart showing the percent change in gold prices in seven major currencies.

The first thing that strikes me about this chart is that while gold may have just broken out in USD terms, the overall trend since 2013 is upward. In some currencies—such as the Australian and Canadian dollars and the euro—gold has been rising strongly for years.

It’s worth pausing to appreciate that gold didn’t just break out in Aussie terms—it just hit a new record high. This has important implications for gold miners Down Under, whose costs are in Australian dollars. As a speculator, searching for great Aussie gold plays just notched up on my priority list.

It’s also worth pulling back to have a look at this in a longer time frame. Here’s the same chart since 2000, just before the beginning of what I think future investors will see as the gold rally of the century (and possibly the beginning of the end for fiat currencies).

Note the way the percent change from a lower starting point makes the USD surge much higher than any of the others. This both shows and empowers the disproportionate influence of the paper-gold traders in New York on gold prices. Gold is still primarily priced in USD, after all.

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