Gold price hits all-time highs in euro, yen; USD next?

Gold price hits all-time highs in euro, yen; USD next? by Neils Christensen for KitCo News

The juggernaut gold market is making its presence felt in currency markets as it hits new record highs against the euro and Japanese yen.

According to some market analysts, the new highs in gold against two major currencies is a further sign of gold’s growing investment appeal as a safe-haven asset.

As a non-yielding asset, gold’s opportunity costs look attractive as the Germany 10-year yield currently trades around minus 40 basis points. Meanwhile, Japan’s 10-year bond offers a negative yield of three basis points.

Marc Chandler, managing director at Bannockburn Global Forex, said that gold does look like an attractive asset compared to European and Japanese bonds. However, he added that the record highs the yellow metal has marked against the two currencies have more to with structural issues in the euro and yen

Chandler noted that the euro has lost significant ground against the U.S. dollar since the start of the year, falling from $1.125 to its latest low at $1.085. He added that the euro still has more room to fall against the U.S. dollar.

At the same time, the U.S. dollar continues to trade at the top of its range against the yen.

“The dollar’s rally has been extremely impressive this year,” Chandler said. “The rally we see in gold is just a function of weakness in the other currencies.”

Mike, McGlone, senior market strategist at Bloomberg Intelligence, agreed that the record highs in gold in other currencies are a reflection of growing weakness in the forex market.

“Currency debasement is typically a primary force for advancing the price of the benchmark store of value, but it’s less about the price of gold advancing and more likely reflects the value of paper currency in decline,” he said in a report Friday.

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