Euro’s future bright, but gold’s brighter

As the new year approaches, so too does the 20th anniversary of the creation of the euro by the European Union.

It came into existence Jan. 1, 1999.

It was valued in round numbers at $1.17.

However, like bitcoin, at the time it had no physical form.

It was simply a bookkeeping entry as nations that adopted the new currency kept using their old coins and notes expressed in francs, Deutche Marks, lire, and the like.

The relationship among francs and marks and lire was fixed to each other.

There were no more fluctuations on the exchanges. Only the outward value of the euro traded and changed on the financial markets.

It took three more years for the euro to take physical form on Jan. 1, 2002.

Then euro coins and notes were introduced.

It is a rare thing to witness the birth of a major currency.

Collectors are used to announcements of new currencies in places like Zimbabwe and Venezuela as one currency is destroyed and another replaces it.

The euro took its place at the top of the major currency list. It is second to the U.S. dollar.

At the time of its creation, it was an expression of economic strength.

Congratulations to the now 19 countries that use the euro.

However, as a major currency, it has become like the U.S. dollar the perennial target of assertions that it will somehow go the way of the old currencies of Zimbabwe and Venezuela.

There is no way to refute financial bogeyman stories.

Anything built in human society can be destroyed.

But is it likely?

Can you order your life to reflect this fear?

According to the www.Kitco.com website, the euro is worth $1.1342 today.

So compared to the dollar, it has declined 3.58 cents, or 3 percent.

That looks pretty stable. It looks like it can be counted on. So why worry?

Enter gold.

Bullion investors like to measure the value of currencies the old-fashioned way and express it in terms of gold.

I used the data on the Kitco site to see how this has gone.

In the process, I learned that the daily records on the site begin on May 20, 1999.

I have some old paper records that show that the price of gold on the first business day of 1999 was $287.40 an ounce.

This morning it is $1,243.40. Therefore, gold is up 4.33 times.

Or expressed another way, a dollar is now worth 23 1999 cents.

In terms of gold, holders of the paper dollar have lost 77 percent of its 1999 value.

The relationship of the euro to gold has taken a similar downward trajectory.

So what is the prudent thing to do?

Predict the demise of the euro and the dollar, which might not happen in our lifetimes, or buy some gold as insurance?

Financial experts tell us that no more than 10 percent of your assets should be in precious metals.

That 10 percent held in the form of gold will guard against the very real depreciation of the two currencies over time.

But, your daily life will not be disrupted if the market turns against gold for a time.

What do I mean?

Well, if you want to pick gold’s recent market peak of roughly $1,900 from the beginning of September 2011, you can say that the dollar has gained value in the past seven years and three months.

In terms of gold, the dollar is now worth $1.53 of its 2011 $1 starting value.

So, should you ignore gold, or forecast the apocalypse, or simply own gold as insurance and focus on the more important things in your life?

Buzz blogger Dave Harper won the Numismatic Literary Guild Award for Best Blog for the third time in 2017. He is editor of the weekly newspaper "Numismatic News."