Gold Is Testing Its 2011 High

Market Analyst & Professional Speculator, Owner of The Speculative Investor
July 12, 2016

Gold is testing its 2011 high in Australian dollar (A$) terms.

The A$-denominated gold price (gold/A$) made a correction low in April of 2013, spent about 18 months forming a base and then resumed its long-term bull market in late-2014. It will probably soon make a new all-time high.

It is useful to follow gold’s performance in terms of the more-junior currencies, for two main reasons. First, gold tends to bottom in terms of these currencies well before it bottoms in terms of the senior currency (the US$). Second, money can sometimes be made by owning the stocks of gold-mining companies operating in countries with relatively weak currencies even when the US$ gold price is in a bearish trend.

A good example is Evolution Mining (EVN.AX), an Australia-based mid-tier gold producer that I’ve followed at TSI for the past few years. As illustrated by the following chart, EVN commenced a powerful upward trend in late-2014 after basing over the preceding 18 months (just like gold/A$). It is now well above its 2011-2012 peak.

As a gold bull market progresses, the more junior currencies and especially the commodity currencies begin to strengthen relative to the US$. This causes the mining companies with operations in the US to start doing relatively well.

Steve SavilleSteve Saville graduated from the University of Western Australia in 1984 with a degree in electronic engineering and from 1984 until 1998 worked in the commercial construction industry as an engineer, a project manager and an operations manager.  In 1993, after studying the history of money, the nature of our present-day fiat monetary system and the role of banks in the creation of money,  Saville developed an interest in gold.  In August 1999 he launched The Speculative Investor (TSI) website. Steve Saville has  lived in Asia (Hong Kong, China and Malaysia) since 1995 and currently resides in Malaysian Borneo.  

India is perennially the world’s largest gold consumer.

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