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The Record High Price of Gold: A Currency Story

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Gold reached a record high on Tuesday, closing at $1,271.70 per troy ounce. It is up over 15% this year. That’s great for gold investors, but what does it mean for the currency in which it’s being quoted, the U.S. dollar? Relative to gold, the dollar, as shown in the chart below, is worth only two-thirds what it was worth at the beginning of 2008, just after the start of the market crash. The euro has maintained 60% of its value compared to gold, and the Swiss franc has retained a more impressive 75% of its value. Gold has had a tremendous run relative to all three currencies. This is not surprising. The yellow metal does well in times of trouble.

So where does the relative gold value of all three currencies go from here? Gold could certainly continue to gain more ground on all three, but notice how the Swiss franc seems to be consolidating. Of the three currencies, the Swiss franc certainly appears to be the favored store-of-value currency relative to gold. So before you load up on gold, don’t forget to look at its relative value in currencies other than U.S. dollars. There’s no rule stating that the recent trend must continue.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.