Chart: Which countries are falling behind in gold mine production
India tops the global ranking with demand nearly 50 times that of its mined supply.
A common flaw that we see the average investor make is to follow their investments measured in foreign currencies and at the same time forget to calculate their local exchange rate on those investments. This is a HUGE mistake as the fluctuation of an investor’s home currency has a massive impact on their returns.
Some investors know that the price of gold has been performing well in the past few years but let’s look at the charts to see how well gold has done for investors around the world.
The above chart tells us the following:
1) Since roughly 2001 the price of gold appears to be rising relative to most currencies and therefore the value or purchasing power of most currencies has been shrinking.
2) Depending on where an investor is living, the price of gold has appreciated differently against the various currencies.
In our opinion it can be very helpful to look at the price of an investment like gold in multiple currencies regardless of where the citizen lives. Please review the following charts with this in mind and we will explain this statement more clearly below:
In the above charts one will notice:
1) Again the price of gold has been rising in all currencies. This clearly illustrates that the bull market in Gold is very strong as currencies around the world are losing value relative to Gold.
2) Depending on the currency the value of gold is measured in, new highs, breakouts, big drops or big advances will vary.
So how can looking at the price of gold in foreign currencies help all investors including US base investors?
It is our opinion that looking at gold in other currencies can sometimes give us a glimpse into the future of what may happen to the price of gold in our own currency. For example, if gold is breaking out in most currencies around the world at different times, but one country has yet to see gold break out in that nations currency, then that nation’s citizen’s may still have an opportunity to buy at lower prices. For example, Japanese (Yen) investors have been seeing the price of gold explode to new highs in other nations and this may give a Japanese investor insight for what may happen to their investments in gold in the future.
Additionally, seeing gold advance in multiple currencies gives the market’s advance more validity. If gold were only advancing in US dollars, one could argue that the advance is more of a reflection of the US dollar losing value instead of gold gaining real value. In fact, we would argue that any appreciation in US Stocks would be a reflection of the US dollar losing value instead of stocks gaining in value. This would be an example of looking at markets through various “measuring sticks”, such as other currencies, to get a better perspective on actual change in value. There will be ups and downs along the way but we believe that Silver, Gold and other commodities are well entrenched in a long term bull market that started in early 2000.
At investmentscore.com we look at investments relative to various markets in order to gain a unique perspective to their “Value” instead of their “Price”. We believe it is a common mistake for investors to be misguided by “price movement” instead of by true value. At the end of the day understanding “Value” is where wealth can be created and stored as “Price” can be greatly distorted by the constant fluctuations of currencies. To learn more about our strategies and to sign up for our free newsletter please visit us at www.investmentscore.com.
September 16, 2010
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