Gold up in all currencies

Most South Africans like to watch the gold price, irrespective of whether or not they are investment professionals. Although a strong gold price does not necessarily directly affect the pockets of the average South African, it is good for the economy and, in general, it creates a feeling of well-being.

"The price of gold bullion is quoted in US dollar terms and very few people really keep tabs on what the price of gold is doing in other currencies," says Dr Prieur Du Plessis, chairman of the Plexus Group. "However, it is highly relevant because it gives a good indication of whether the gold price is in a fully-fledged bull market and is not simply rising due to a declining dollar."

The gold price is not just rising in US dollar terms, but also in most major (and minor) currencies as illustrated by at the end of this article. "Bullion veterans will recognise this phenomenon as a manifestation of solid investment demand and a vote of no confidence in fiat paper money per se," says Du Plessis.

According to Du Plessis, the message is even more vividly illustrated where gold is expressed in a basket of emerging-market currencies. "This is calculated by dividing the dollar bullion price by the Wisdom Tree Dreyfus Emerging Currency ETF (CEW)," says Du Plessis. "Although the chart has been toying with its 50-day moving average line since late last year, the long-term upward trend is still very much intact," he adds.

Du Plessis remains bullish on gold in the medium term, especially as he believes the vast money printing by central banks could set off strong inflation pressures down the road. "I will not be surprised to see bullion remaining in a secular uptrend for some time to come. Add bullion to your portfolios but, given the notorious volatility of the metal, do so only on pullbacks," he advises.

Gold price movements in various currencies