FRIDAY the Thirteenth saw the gold price in
Dollars do something it's managed only 7 times in the last 11 years.
traded flat from 12 months before.
if you bought on 13 July 2011, you hadn't made a dime by the time New York
got itself showered and brushed its teeth this morning. You held just the
same Dollar-value one year later – basis the London AM Fix – at
$1579 per ounce.
Between then and now, in fact, anyone buying gold to insure, hedge or
speculate-to-accumulate with their Dollar savings was more than likely to
have paid a higher price, too.
The gold price in Dollars has been higher than it was Friday morning on 227
trading days. All of them came after 13 July 2011. Half of them were in 2011,
and the other half here in 2012. Only 25 trading days saw gold below where it
stood this morning. Even Friday afternoon's little pop to $1595 left gold in
Dollars badly lagging the last 12 months' average.
contrast that with the gold price in Euros today. It's only been higher on 45
trading days. Recording a London Fix of €1300 per ounce Friday
afternoon, in fact, gold has gained 16% for Eurozone buyers from this day
How come? Most obviously, the Euro has of course fallen versus the Dollar. So
what has been flat for US investors has risen for investors in France,
Germany, Italy and the other 14 single-currency states. But what's driven
that fall in the Euro highlights both why people buy gold, and what it can
help do for them when they do.
The Eurozone crisis might well worsen the economic slowdown worldwide. A true
sovereign default – or exit – would most likely spark the kind of
globalized panic not seen since Lehmans failed, or
worse. But until then, the focus of these rising tensions is squarely inside
the single-currency zone. And if you're buying gold to insure against that
kind of concern, it's asking a lot to get insurance on other people's localized crisis as well.
The Dollar's rapid tumble of 2002-2008, for instance, sparked much debate and
anxiety about the US currency's role as world #1 reserve. It left Euro gold
prices pretty much untouched, however, until the financial crisis –
seemingly localized in the US housing and mortgage market – revealed
itself to be all too international.
Again, the rising temperature in Europe today – what the World Gold
Council's Marcus Grubb calls "the ambient temperature" of what is
now a permanent emergency – may well prove hot for Dollar, Sterling and
Yen investors too in due course. Meantime, gold is holding near its all-time
record highs for Eurozone citizens. That's a clear sign that the ambient
temperature, the background radiation, of this crisis is also dangerously
if the emergency's focus expands to include the Dollar, or switches to the US
fiscal cliff, zero-rate policy, or long-term structural bankruptcy of the
fifty United States? Of those 7 occasions since summer 2001 when the gold
price in Dollars has been flat from 12 months before – like it is today
– then buying that dip has proven a winning trade.
The minimum return 12 months later again has been 25%. On average, buying
gold when it's gone nowhere – or slipped a couple of per cent from a
year earlier – has returned 33% for US investors over the following
repeat is far from guaranteed, of course. There's always the possibility
that, unlike on the 7 previous occasions shown above, the gold price has now
slipped out of its bull market. And barring a sharp jump in the next two
weeks, gold in Dollars will soon be so far under-water from 12 months ago, it'll be drowning compared to the record highs of
August and September 2011.
investors and savers wanting to buy bargain insurance, however, would be
forgiven for thinking the financial crisis is a long way from finished just