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Category: Gold

Gold in dollar terms but not all dollars are equal

As the US stock market stretches to valuation levels similar to 1929 and 2000 on most observable metrics, (my particular favourite is price/revenues),...

3 May 2019


As the US stock market stretches to valuation levels similar to 1929 and 2000 on most observable metrics, (my particular favourite is price/revenues), many people are aware that gold ‘hasn’t moved’ in over five years in USD dollar terms as the Net Asset Value chart shows below. The gold price has been broadly unchanged around $1300/ oz, give or take a bit.

But, in the other dollar markets of Australia and Canada, gold has risen by roughly 35% over the same period.

Is gold seen as more attractive by its other dollar counterparts in Australia and Canada? Of course not. It is clearly just a function of the changing exchange rates. The USD has outperformed the Australian and Canadian dollar by the 35%, that gold would appear to have risen.

There are economic drivers of this period of strength in the USD relative to its dollar relatives. The US stock market has far outperformed its dollar peers. In the last few years, US equities have risen twice as fast as Australia and Canada.


GDP growth, backed by growing company earnings has been consistently higher in the US and the cyclical path of interest rates is clearly being led by the US, however, precarious that maybe. But, the mere fact that the US money market curve is pricing in interest rate cuts later in the year with the unemployment level at 3.8%, an historic low, shows you quite how far we are in the asylum maze. There is clearly very little room for additional declines in the jobless rate, which has been the main source of GDP growth from the recession lows when unemployment was 10%. Typically, you would expect wage pressure and falling profit margins at this point in the cycle.

Canada and Australia have ‘benefitted’ from the insanity of the US inspired monetary policy before and after the 2008 crisis, fuelling house prices to rather ridiculous multiples. The problem is now, that house prices are starting to fall, with the economy faltering and the currency and interest rates adjust accordingly.

Whether it is Canada, Australia or other non-US countries, the importance of the analysis should be clear in relation to gold. While far too many people focus on gold in US dollar terms, it is crucial to understand that gold fulfils its function most admirably all other the world. When growth is declining, property markets are faltering and stock markets are struggling, gold in those home markets has risen in host currency terms. The annualised gold return for the last five years for USD might well be barely 1%, but in many parts of the globe it is over 6%. Gold remains the true portfolio diversifier and in times of crisis, it is a vital part of any portfolio. Rotate your wealth into gold with Glint.

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