A
common flaw that we see the average investor make is to follow their
investments measured in foreign currencies and at the same time forget to
calculate their local exchange rate on those investments. This is a
HUGE mistake as the fluctuation of an investor’s home currency has a
massive impact on their returns.
Some investors
know that the price of gold has been performing well in the past few years
but let’s look at the charts to see how well gold has done for
investors around the world.
The
above chart tells us the following:
- Since
roughly 2001 the price of gold appears to be rising relative to most
currencies and therefore the value or purchasing power of most
currencies has been shrinking.
-
- Depending on
where an investor is living, the price of gold has appreciated
differently against the various currencies.
-
In
our opinion it can be very helpful to look at the price of an investment like
gold in multiple currencies regardless of where the citizen lives.
Please review the following charts with this in mind and we will explain this
statement more clearly below:
In
the above charts one will notice:
- Again the
price of gold has been rising in all currencies. This clearly
illustrates that the bull market in Gold is very strong as currencies
around the world are losing value relative to Gold.
- Depending on
the currency the value of gold is measured in, new highs, breakouts, big
drops or big advances will vary.
So
how can looking at the price of gold in foreign currencies help all investors
including US base investors?
It is
our opinion that looking at gold in other currencies can sometimes give us a
glimpse into the future of what may happen to the price of gold in our own
currency. For example, if gold is breaking out in most currencies
around the world at different times, but one country has yet to see gold
break out in that nations currency, then that nation’s citizen’s
may still have an opportunity to buy at lower prices. For example,
Japanese (Yen) investors have been seeing the price of gold explode to new
highs in other nations and this may give a Japanese investor insight for what
may happen to their investments in gold in the future.
Additionally,
seeing gold advance in multiple currencies gives the market’s advance
more validity. If gold were only advancing in US dollars, one could
argue that the advance is more of a reflection of the US dollar losing value
instead of gold gaining real value. In fact, we would argue that any appreciation
in US Stocks would be a reflection of the US dollar losing value instead of
stocks gaining in value. This would be an example of looking at markets
through various “measuring sticks”, such as other currencies, to
get a better perspective on actual change in value. There will be ups
and downs along the way but we believe that Silver, Gold and other
commodities are well entrenched in a long term bull market that started in
early 2000.
At
investmentscore.com we look at investments relative to various markets in
order to gain a unique perspective to their “Value” instead of
their “Price”. We believe it is a common mistake for
investors to be misguided by “price movement” instead of by true
value. At the end of the day understanding “Value” is where
wealth can be created and stored as “Price” can be greatly
distorted by the constant fluctuations of currencies. To learn more
about our strategies and to sign up for our free newsletter please visit us
at www.investmentscore.com.
Michael Kilbach
Editor
Investmentscore.com
Michel Kilbach is
the President and Editor or www.investmentscore.com,
an online publication designed to show investors how to make profitable entry
and exit trading decisions in high growth potential investments.
Investmentscore uses a unique scoring system as a visual guide to assist
investors in making lower risk / higher reward trades.
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