Forum Archive Index - June 2002

[Derek <dkw@paradise.net.nz>]

Since January this year the US dollar index has fallen from 120 to 107.

Gold has risen from $278 to $318 USD an ounce.

Therefore taking the falling US dollar into account, as gold really risen 
at all?

The theoretical price now based on the fall in the US dollar would be - 
(120/107) * 278  = $311. This morning gold was about $318 USD an ounce, 
therefore taking the fall in the US dollar into account, gold has really 
only risen about $7 or  2% since January. At its recent peak of about $330 
an ounce it had risen $19 or 6% since January.

In other words the only driving force needed to get gold to todays level 
was the fall in the $US, not a 'rush to safety', or a flight from equities 
into gold.

This is even more obvious when considering gold versus the New Zealand 
dollar, Since Jan 02 Gold has _fallen_ against the NZD from about $669 NZ 
an ounce to $646 NZ an ounce, so for New Zealanders spending there own 
dollars, gold has fallen in price since January!

This seems a remarkable fact given the hype about rising gold prices and 
talk of gold price bubbles etc. It seems clear from the above that there is 
not a bubble at all in the price of gold and that increases in demand for 
gold are not yet showing through in higher world prices.

Regards,
Derek




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