Tag: rand

Goldprice in six different currencies

Reuters published an article lately about oil prices in six different emerging market currencies. The graph embedded in this article shows how oil prices are setting new all-time highs in Brazilian reals, Russian rubles, South-African rands and India rupees. Because of the decline of emerging market currencies, people in those countries pay record high prices for a barrel of oil. But what about the goldprice?

Goldprice in foreign currencies
The graphs by Reuters inspired us to do the same with gold, which set a new all-time high in dollars in 2011. The goldprice peaked at about $1.920 per troy ounce and has declined ever since. Right now, the price of gold in dollars is about 34% below the all-time high. But what about the price of gold in beaten down emerging market currencies? Marketupdate collected some data and made the following graphs. Most of the data is from the weekly updated spreadsheet published by the World Gold Council, while some data is based on historic exchange rates on the forex market. The graphs start at the 9th of September 2011 and ends with the gold price at the end of January 2014.

Goldprice in six emerging market currencies since Sept 2011
As you can see the price of gold in some emerging market currencies didn't drop nearly as much as the goldprice in dollars or euros. In South-African rand, the goldprice was actually higher last week than it was in September 2011 (when the goldprice in dollars peaked at $1920 per troy ounce). When measured in Brazilian real, the gold price at the end of January 2014 was only 4,15% below the level of September 2011. For the Turkish lira and the Indian rupee, the gold price went down only 10,3 and 15,5% respectively, much less than the 34% price decline in US dollars over the same period.
Gold as a hedge
Gold is above all a hedge against a decline in the local currency. No matter how much governments and the central banks abuse their fiat currencies, they can not influence gold. That's why they don't like you to buy gold. The precious metal is a hedge against their fiat currency system, which is only good as medium of exchange and unit of account. The store of value lies in physical things, gold being the most liquid and uniform one of them.

6 februari 2014
Goldprice in Argentina: +28% in January

In Argentina, the price of gold rose about 28% in the first month of this year. In the meantime, the price of gold in euro’s and dollars rose about 5%. The big difference is the result of a devaluation of the Argentine currency, the peso. The devaluation is unfortunate for savers, because they saw the real value of their savings decline. The gains are for the debtors, whose debts in real terms went down by the same amount.

Argentinians who converted their savings into gold were barely harmed by the devaluation of the currency. While the money in their pocket lost some value, their gold didn’t. The price of gold in Argentina rose to such an extent that the holders of physical gold kept the value of their savings. On the first of January, the price of gold was 7.860 Argentine pesos. On the 30th of January, the price was 10.104 pesos. One day before, on the 29th, the goldprice was just 8.981 peso. So in just one day, the goldprice rose by more than 10%!

The graph below shows the goldprice in six different currencies: the Russian ruble, the Argentine peso, the Turkish lira, the eur, the Indian rupee and the Sout-African rand. As you can see most of the emerging market currencies lost value compared to both the euro and gold.

Goldprice in five emerging market currencies (Source: Goudstandaard.com)

Gold as a hedge against devaluation
Gold is often cited as a good hedge against inflation, but it would be more accurate to state that gold is a hedge against a devaluation. Sudden drops in the value of a currency are a nightmare for savers, but not for those owning physical gold. Gold stores value in an environment with currency devaluation, while the relationship between gold prices and inflation is not so clear. Last year, Venezuela devalued their bolivar by 44% against the dollar. Those holding the currency lost purchasing power in dollars, but the gold would still buy them the same amount of dollars as the day before the devaluation. Up until now, currency crises are related to banana republics and third world countries. That's why people living in those countries value gold differently than in Western economies, where the precious metal is just an investment opportunity. Gold as a speculative hedge when the stock market goes down, which has to be sold as soon as the stock market picks up again. We beg to differ...

3 februari 2014
Centrale bank Zuid-Afrika verhoogt rente naar 5,5%

In navolging op India en Turkije verhoogt ook Zuid-Afrika de rente, zo schrijft Businessinsider. Tijdens het maandelijkse overleg van de Zuid-Afrikaanse centrale bank werd besloten de rente op te schroeven van 5% naar 5,5%, een stijging van 50 basispunten. De renteverhoging lag niet in lijn der verwachting, maar is waarschijnlijk te verklaren door het optreden van de centrale banken van India en Turkije. De renteverhoging heeft opvallend genoeg geen rust gebracht op de valutamarkt, want de waarde van de Zuid-Afrikaanse rand is sinds het rentebesluit alleen maar verder onderuit gegaan.

Rente opschroeven
Terwijl de Federal Reserve en de ECB zo laag mogelijk houden zien de opkomende markten zich genoodzaakt hun rente juist te verhogen. Het monetaire beleid van de Amerikaanse centrale bank heeft voor een overvloed aan dollars gezorgd, met als gevolg dat speculatief geld richting opkomende markten stroomde. Nu de Federal Reserve begint met tapering kiezen investeerders ervoor om geld weg te halen uit de meer risicovolle opkomende markten. Door de rente te verhogen kunnen centrale banken in theorie de vlucht uit hun valuta afremmen. Dinsdag verhoogde de Indiase centrale bank de rente met 25 basispunten naar 8% en niet veel later die dag verhoogde de Turkse centrale bank tijdens een ingelaste bijeenkomst haar korte rente met 425 basispunten naar 12%. Helaas hebben al deze ingrepen nog niet het gewenste effect opgeleverd. De Indiase roepie, de Turkse lira én de Zuid-Afrikaanse rand zijn sinds de verhoging van de rente allemaal weer verder weggezakt ten opzichte van de Amerikaanse dollar...

De Zuid-Afrikaanse rand tegenover de dollar (Bron: XE.com)

Indiase roepie tegenover de dollar (Bron: XE.com)

Turkse lira tegenover de dollar (Bron: XE.com)

29 januari 2014