The gold price continues to consolidate at over $1,500 per ounce, with yesterday's release of disappointing US GDP figures boosting gold to a new record high of $1,538.47.
The US economy grew at an annualised rate of just 1.8% to the end of the first quarter, a sharp drop on the 3.1% figure for the fourth quarter. The fall was blamed on rising energy costs and bad weather among other things. First time claims for unemployment benefits also rose by 25,000 to 429,000, confounding many economists who had expected a fall in claims.
This news was of no help to the ailing US dollar, which remains under pressure in currency markets. The dollar hit new 2011 lows against the euro and the British pound yesterday, while the Dollar Index (USDX) is currently trading at around 73 - close to record lows.
However, according to new calculations from Deutsche Bank's economics team, adjusting for inflation the dollar has already hit a new post-gold standard record low against a trade-weighted basket of currencies. These calculations are based on the Federal Reserve's Broad Trade-Weighted Dollar Index, which includes a larger group of currencies than the USDX and is weighted based on foreign trade.
Though the dollar is in particularly bad shape at the moment, it's important to remember that all fiat currencies are just as flawed in concept as the dollar. They are losing value at different rates, but nonetheless they are all constantly depreciating.
As this video highlights, a rising gold price is not necessarily indicative of the US dollar falling against other currencies and vice versa. A good illustration of this point was gold's price appreciation in the spring of 2010, when fears about European sovereign debt problems were at the forefront of investors' minds and when the USDX was rising.
Gold has been appreciating in value against all currencies over the last decade. Given the US dollar-centric nature of much news and analysis of the gold market, investors may be surprised at some of the figures from this table which documents gold's performance against major currencies since 2001. Are many aware that for the entire decade, gold had its best year against the British pound in 2008 - a relatively modest year in terms of US dollar gains, and one in which gold actually lost value against the yuan, the yen and the Swiss franc?
This is all by way of pointing out that gold's rise against the dollar shouldn't induce complacency on the part of non-US based investors. No matter what president or monarch is on the note, paper money is no safe haven in comparison to gold.
Source: Gold Money