Gold up in pesos

The price of gold is quoted worldwide in U.S. dollars, though payments in other nations are normally made in the local currencies. As measured in U.S. dollars, the price of gold fell 11.1 percent over the course of 2015. By this one measure, people might quickly believe that owning gold was not beneficial last year.

However, you have to also consider how other currencies beyond the U.S. dollar performed in 2015. Here is how gold performed last year versus the currencies that I regularly track:

In 12 of the 30 countries listed, the price of gold actually rose in terms of the local currency last year. Obviously, residents in nations with the weakest performing currencies would have been much better off had they owned gold for all of 2015. Note that I did not include the Kazakhstan tenge on this list, which was perhaps the worst performing currency over the course of last year (at least at official exchange rates).

One year does not tell the whole story. To update my 15-year analysis a year ago of how various selected assets have performed (versus the U.S. dollar) now 16 years since Dec. 31, 1999, look below:

As you can see, over a longer term than one year, gold and silver had outperformed all other assets that I track.

Many readers are aware that I normally produce two radio commentaries each week, Wednesday and Friday mornings at about 8:45 a.m. Eastern Time on local Lansing radio station 1320 WILS-AM. The segments are titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know.” My 3-minute commentaries are accessible at http://1320wils.com/pages/patrick-a.-heller-commentary. If you scroll down the page, you can click on and listen to the Dec. 28 and 30 and Jan. 6 commentaries that covered 10 forecasts I made for 2016.

Two of the forecasts have already come to pass. As I am confident most readers realize, the world’s financial markets have been much more volatile since the beginning of 2016 than they were last year. Check one prediction off the list, at least so far.

What you may not realize is the extent to which China is aggressively pursuing strategies to promote the international usage of the yuan. In doing so, the use of the U.S. dollar for international commerce is destined to fall. Perhaps the first major move was to establish the Shanghai Gold Exchange for trading kilogram-sized gold ingots with prices denominated in yuan.

Last year, China took three more steps toward this end. The International Monetary Fund’s Executive Committee approved the inclusion of the yuan as part of the IMF’s Special Drawing Rights, to begin later this year. Russia also announced that it would replace a significant proportion of its existing central bank reserves (of which the U.S. dollar is the largest component) with yuan-denominated assets. China also changed the standard of its 2016-dated bullion coinage to metric weights and away from troy ounce weight such as widely used in the United States.

Now, early this year, an unofficial announcement (which is how typical Chinese financial developments are made public) states that foreign banks with branches in China will be required to support the forthcoming April expansion of the Shanghai Gold Exchange operations or risk being “limited or penalized.” While the Chinese government may not impose actual fines, it could reduce the ability of non-cooperative foreign banks to continue some of their current operations in that country. Check another prediction off the list.

With the financial upheaval in paper asset markets that we have already witnessed early in 2016, I suspect there are many more people who wished they had already acquired some wealth insurance in the form of bullion-priced physical gold and silver coins and bars. As I write this Tuesday, prices are attractive and moderate quantities are readily available. I cannot guarantee how long this opportunity will last.

Follow up to last week’s commentary:

Last week I wrote about the current Federal Trade Commission’s regulations covering deceptive trade practices that prohibit describing any silver coins with less than a 90 percent silver purity with the word “silver” and also requiring the description of any gold product of less than 24-karat purity to indicate the purity of the gold content as part of the product name.

The Federal Trade Commission (FTC) is seeking comments by April 4, 2016 to U.S. Code Title 16 Chapter I Subchapter B Part 23, which is “Guides for the Jewelry, Precious Metals, and Pewter Industries.”
You can read the current regulations at http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=1&SID=bfc73ec94d2800260adb2ae84558f5f3&ty=HTML&h=L&mc=true&r=PART&n=pt16.1.23.

Some readers of last week’s column have asked how they might submit comments to the Federal Trade Commission on these regulations, which I should have included. Here it is. The FTC prefers emailed comments, but will accept them by other means. Go to https://ftcpublic.commentworks.com/ftc/jewelryguidesreview/ for the template for emailed comments. You can also click on this link at this location for alternate methods of submitting your comments. Obviously, I recommend reading the existing regulations found at the first link above, as opposed to only my last week’s column, before submitting your thoughts.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He is the owner emeritus and communications officer of 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). His radio commentaries titled “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).

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