Gold priced in G4 currencies show further weakness is possible
On this blog, we usually follow the price of Gold in US dollar terms. Since the USD is a reserve currency (for now at least), majority of the global trade as well as raw material exchange is done in this currency. However from a investor point of view, Gold priced in other global currencies sometimes offers clues to the direction of the metal itself, well before it happens in its USD price.
Interestingly, the price of Gold in euros and pounds has recent made a lower low, unlike the USD price. Furthermore, due to the BoJ weakening currency policy, Gold priced in yen has held up relatively well, unlike the other developed nation currencies. The pattern of lower lows and lower highs in the euro and pound priced Gold markets could be a signal that further weakness will also occur in USD Gold price too.
Strongest Gold demand comes from Global Emerging Markets
However, it is just as important to track the price of Gold in currencies where demand is strong, historical link is alive and tradition towards Gold is respected. Several that I have chosen above include top consumers including India, China, Russia and Turkey.
Other than the Chinese yuan, other GEM currencies have suffered in recent years. Whether its the Indian rupee, Russian ruble or the New Turkish lira, all of these currencies have experienced substantial pressure against the US Dollar. Therefore, it should be no wonder as to why Gold prices held up better against these currencies. Finally, from a consumer point of view, higher Gold prices in local countries also hurts demand.