Gold up in euro, yen and rand

As I write this on the morning of Dec. 29, the spot price of gold is at $1,193. That means that gold at the moment is down 0.8 percent against the U.S. dollar since the end of 2013.

However, gold has fared better against all 21 other world currencies that I track. At the moment, this is how the price of gold has fared since the end of 2013, as measured in each of these currencies:

Chile peso +14.6%
Japan yen +13.6%
Brazil real +12.8%
Mexico peso +12.0%
Euro +11.7%

South Africa rand +9.8%
Switzerland franc +9.5%
Canada dollar +8.7%
Australia dollar +8.6%
Great Britain pound +5.7%

Malaysia ringgit +5.5%
Taiwan dollar +5.3%
New Zealand dollar +4.7%
Singapore dollar +4.0%
South Korea won +3.3%

China yuan +2.0%
India rupee +1.6%
Indonesia rupiah +0.7%
Philippines peso +0.0%
Thailand baht +0.0%
Hong Kong dollar -0.7%

As you can see, most of the world’s population would have been better off this year owning gold rather than their local currencies.

By the way, while the Dow Jones Industrial Average outperformed gold thus far in 2014, one overall long-term statistic points out that is not always the circumstance. In August 1999, it would have taken more than 42 ounces of gold to “buy” the DJIA. On Dec. 24, when the Dow average broke above 18,000 for the first time ever, it would have taken only 15.35 ounces of gold to buy the Dow.

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What that means is that for the past 15 years and four months, investors would have realized a far better return owning gold than owning a DJIA index fund. While you can pick other time frames (such as the year 2014) that produce a different result, the point is that gold serves as a legitimate counterbalance against the risk of declines in paper assets such as stocks, bonds and currencies.

For a very long term comparison, the U.S. dollar was worth .0484 of a troy ounce of gold at the time of the creation of the Federal Reserve Bank in 1913. Right now the value of the dollar has sunk to .00008 of a troy ounce of gold. In other words, the dollar has lost 98.3 percent of its value against gold over the past 101 years.

Thus far in 2014, the U.S. Dollar Index is up more than 10 percent. This occurred more because of weakness in other currencies than any particular strength in the dollar. In 2015, there are a number of risks that the dollar could move in the opposite direction against world currencies. I’ll go into more details in the coming weeks.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes ‘Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com and http://www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns). His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.