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:
- 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.
- 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:
- 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.
- 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.
