[Chart Of The Week] Here's What Gold Looks Like If Priced In Emerging Market Currencies

JC Parets
October 4, 2016

The headline writers do their best to make you think that Gold is a US Dollar story. But in the real world, the one we're all forced to live in, Gold is a Gold story. It really has nothing to do with the US Dollar, and if you price gold in the other currencies, you'll see that very quickly. While gold might be struggling when priced in US Dollars, if you look at it priced in a weaker currency, say emerging markets, you'll see a completely different picture.

Today we are looking at Gold priced in an equal-weight basket of Emerging Market Currencies, specifically the BRICS:

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[hide_from visible_to="member"]Here is what a basket of the BRICS currencies looks like. The All Star Charts BRICS FX Index is an equal-weight currency index broken down as follows (20% Brazil BRL, 20% Russia $RBL, 20% India $INR, 20% China $CNY and 20% South Africa $ZAR):

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ASC BRICS FX

Notice how this basket of emerging market currencies has been in a strong downtrend for years, more so that Gold. Therefore, if you price gold in the weaker currencies, we should see a stronger value. Here is Gold priced in the All Star Charts BRICS FX Index:

Gold - ASC BRICS FX

Look how we peaked in 2012, not in 2011. Also notice how we were able to break out above that resistance area in 2015. The bottom for Gold was in 2013, not last December like it was if you price Gold in US Dollars.

So what does this mean? How does this help us? Well, first of all, gold is not a US Dollar story. Gold is a Gold story. We can own Gold in any currency we want. No one is stopping us. If you choose to buy Gold in US Dollars, well then that is your choice. By shorting a different currency other than US Dollars, you can denominate your investment in any currency you'd like.

Taking a step back, when we go currency by currency pricing gold in different denominators from around the world, we quickly see the gold has been doing a lot better than the headlines might suggest. Although short-term I still believe gold is a no-touch, bigger picture, the weight of the evidence is constructive.

Here is a full research report on Gold & Silver that I put together this week:

[Premium] Here’s Everything To Know About Gold & Silver Prices

 

 

Tags: $GC_F $GLD $SLV $SI_F $EEM $BRLUSD $CNYUSD $INRUSD $RBLUSD $ZARUSD

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