Continuing a theme covered in some other articles published here, the West is fixated on valuing gold, and all other commodities, in the U.S. dollar as though no other currencies exist. There is obviously a justification in this given that the US dollar is the world’s most convertible currency and effectively the world’s principal reserve currency, but it ignores the fact that perhaps in most of the rest of the world, given the strength of the dollar against other monetary units, that what might appear to be a major fall in commodity prices in U.S. dollars is not nearly so bad. Indeed in many cases commodities priced in local money may even have seen a significant price increase. Thus the reported global commodity meltdown of 2014, which saw prices fall almost across the board (with some notable exceptions) last year in U.S. dollars, was nothing of the kind in many other nations and it is the rise or fall in price in those currencies which primarily affects local traders and businesses.

See: Gold fifth best performing commodity of 2014

Nick Laird, on the subscriber section of his www.sharelynx.comwebsite, publishes long-term gold price charts in a dozen different currencies and these are very interesting to examine in more detail. For example with the huge fall in the Russian ruble exchange rate against the U.S. dollar, due to the drastic drop in the oil price and economic sanctions over the annexation of Crimea and disputed military involvement in Donbass in the Ukraine, the gold price has hit huge new all-time highs in the Russian currency – see chart below. With Russia being one of the world’s top gold producers, and also having the world’s fifth largest national gold reserve (if one ignores possible unreported gold purchases by the Chinese central bank), the significance of this, if one resides in Russia and are a gold holder, is hugely important and demonstrates the rationale behind the Russian central bank’s recent gold purchasing spree.

Russian gold

While perhaps Russia is something of an extreme case, given the big recent rise in the value of the dollar there are a number of other countries – notably another major gold producer (South Africa) and the world’s second largest gold consumer (India) where the value of gold in the local currency is currently not far off its all time high point. Indeed in India, the all-time gold price high in the rupee was not, according to the Sharelynx charts, in 2012 when the high in the dollar price was seen, but in the following year unlike in most of the rest of the world.

Even in a major secondary global reserve currency like the Euro, gold has obviously performed far better than in dollar terms.

For comparison the 10 year US dollar gold price chart is also published below:

Dollar gold

So Russian gold holders, and some others, have done very nicely thank you, while U.S. holders may have been rather despondent.

Now whether gold has made a permanent break-out is too early to judge, although some technical analysts have already called this based on the price move up through the 50 day moving average which tends to bring in technical buying. Today the price has slipped a little ahead of the European Central Bank meeting which is widely expected to confirm the implementation of a quantitative easing programme. But views are mixed as to the effect of such a decision on the gold price. We will have to wait and see.