People who follow commodities markets, especially precious metals, are often familiar with the value assigned to their gold at a given point in time, whether they own gold coins, bullion, ETFs, or similar holdings. When this article was originally published, that information could readily be found through the London Fix and widely used websites such as kitco.com and goldprice.org. Measured in U.S. dollars, gold had been a comparatively weak performer in the preceding years. Still, 2016 was described as something of a breakout year for the yellow metal. Even at roughly $1,208 per ounce when this article was written, gold remained far below the August $1,900 per-ounce high recorded in 2011. Americans can take a narrow view of gold’s value because it is usually considered only in dollars, a currency that had outperformed many other major currencies in the years discussed here. From the standpoint of other currencies, however, gold had recently performed well and faced very strong demand outside the United States. The original article examined gold’s results in three other major currencies and outlined reasons readers were invited, at publication, to consider buying gold coins.
Canada
Canada is often viewed as broadly comparable to the United States in the strength of its economy and currency. Yet, when this article was originally published, it had not been long since the U.S.-dollar-to-Canadian-dollar ratio stood at 1:1. The article noted that many people might not have recognized how much the U.S. dollar had strengthened against the Canadian dollar in recent years, reaching 30% – 40%. Canadians were consequently described as experiencing a declining currency and inflation in many imported goods, including fresh produce. When the article was published, this article from Zerohedge was cited as an illustration of the unusually high food prices Canadian residents were then paying. Although the currency’s decline could appear impossible to offset, the article argued that gold ownership would have preserved purchasing power. Gold, priced in in Canadian dollars, was $1,651.49 at the time of writing—about 37% more than its U.S.-dollar price. The article said it was no accident that gold’s price had closely followed the Canadian dollar’s foreign-exchange value, then turned to two more countries with strong public interest in gold to show this was not an isolated case.
India
Few places may hold gold in higher cultural esteem than India. Indian citizens have been drawn to gold for thousands of years and have regularly ranked among the world’s two largest gold-importing populations. The original article suggested that this attraction may partly reflect the monetary policies of the Indian government and the Reserve Bank of India. In the years it discussed, the rupee had performed relatively poorly. As measured in rupees, the article said gold’s price had risen dramatically since 2000. This chart was cited as showing the parabolic rise in gold over the preceding 16 years. Despite those elevated prices, the original article reported that India’s imports stayed strong through 2015, based on data available at the World Gold Council’s website.
China
Although gold carries considerable value in Indian culture, the original article noted that China had recently moved ahead of India as the largest gold-importing nation. It also reported that, according to this CNN Money article, China had become the world’s largest gold producer. China’s renminbi was characterized as intentionally debased and as having weakened against other leading currencies in the years before publication. The article attributed this in part to the country’s accumulated debt, the Bank of China’s loose monetary policy, and direct Chinese-government involvement in financial markets. It said the price of gold in renminbi had risen substantially in recent years and, coincidentally, began climbing around the same period that gold priced in rupees accelerated. In light of China’s recent slowdown at publication, the article predicted that the government and Bank of China would use every available measure, further reducing the currency’s value and raising gold prices.
At the time of original publication, the article described the following: Why Buy Gold Now?
The original article had offered three examples of gold’s performance across global currency markets. It acknowledged that each of the three featured currencies had declined against the dollar in the recent years discussed. Still, currency markets, like the economy, were described as cyclical, with no assurance that the dollar would remain dominant in foreign-exchange markets. At the time of publication, there had been considerable discussion of a possible negative interest rate policy (NIRP) in the United States. The article said there was uncertainty about whether the Federal Reserve could legally pursue a NIRP, while suggesting it would find a way if that became its objective. If adopted, the article predicted, a NIRP would weaken the dollar and likely lift gold prices measured in dollars. It further warned that the effect might extend beyond the dollar, possibly beginning a full currency war and a race to the bottom; in that scenario, it predicted gold—and silver as well—would rise sharply against all major world currencies.
Summary
In closing, the original article emphasized the value of considering gold prices through international currency markets and pointed to three examples of gold’s strong performance in the recent years it covered. While the dollar had enjoyed a strong run against other major currencies at the time of publication, currency markets were said to rise and fall over time, so the article anticipated that the dollar could eventually weaken. It suggested that a Federal Reserve pursuit of a NIRP might intensify that outcome. The article concluded with a reminder that, when someone asked about the price of a gold coin, the relevant follow-up question was which currency they meant.
