The Wisdom of Owning Gold in Euros

We note that since the 7th of this month as the EUR has fallen from 1.1125 to this morning’s 1.0885, gold in US dollar terms has risen from $1255/oz. to $1264. In other words, over that same period as gold has risen 0.7% in dollar terms, it has risen 2.7% in EUR terms. Indeed, even as gold has fallen by $5/oz. in the course of the past twenty four hours, it has risen relative to the EUR.

With the monetary authorities in Europe having no choice but to err upon the side of easier policies even as the monetary authorities here in the US are rather obviously erring toward tighter policies… witness the chart of the Fed. St. Louis’ Adjusted Monetary Base below (courtesy of FRED Economic Data)… there is every reason, fundamentally, to err toward owning gold in EUR denominated terms.

We have been making this case for quite some long while… several years in fact… and we see no reason whatsoever to change that “tune” at this point. Indeed, we see more reasons now to make that case than we have previously. As we write, Gold/EUR is trading to and through €1160/oz. We can make the case that €1200 is a reasonable target to the upside, and we shall reevaluate when it gets there. For now, we shall sit patiently as the market begins to discover the wisdom of the position.







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