You have to dial in the exchange rates as well as the increase or decrease in the gold price gold.
Gold is priced in dollars.
You can only buy in sterling – since that is your currency.
Even if the price of gold, which is priced in dollars does not change, if the value of the pound falls against the dollar, then an ounce of gold will now cost less in pounds than it would if you were buying in dollars. Nothing to do with the price of gold and everything to do with exchange rates. Of course, there are winners here, particularly if you are looking to buy since a fall in the value of the pound gives you a dip in the price if you are a sterling purchaser.
When the pound rises against the dollar it makes the purchase of gold cheaper for anyone buying in sterling. Of course, if you have already bought some gold the lower price can be upsetting as your existing holdings seem to go down in value, even if the price of gold in dollars hasn’t moved.
Annoyingly, the the media are currently using this as a reason not to buy gold. What they are missing is the fact that exchange rates go both ways. It would be ridiculous to assume that exchange rates are only a one-way street.
Many people believe that sterling is already close to a high against the dollar and that it will start to fall over the next few months. If this is true then the value of your gold will go up in value even if the price of gold in dollars remains the same. This will please you if you are “fully invested” but if you were looking to buy more you will be annoyed that the price has gone up again.
September has traditionally been a good time to see gold prices rise. This is when the Indian market really takes off after a usually quiet August. If the pound falls against the dollar, as a sterling buyer, you will get a double whammy.
Of course none of this is important in the medium to long-term. It is the year on year price that interests us.
Gold has done us proud over the past ten years and I believe that will continue as governments around the world continue to print money. Whichever chart you look at, whether it is the price of gold in Dollars, Sterling or Euros, the ten-year graph has made all other investments look pretty sick.
