Is Having Gold a Dollar Risk?

wellerway

I have various investments of which about 10% is gold as a hedge against major currency devaluation.

Gold is priced in USD, and I think the USD is set to fall in value, so the price of gold set in USD would also devalue against other currencies.

I'm thinking of increasing my gold holding, but am not sure whether a weakening dollar will be good or bad for gold. What matters ultimately is the value of my assets in terms of GBP or EUR.

Thanks for your thoughts on this.

Loughton_Monkey

You have effectively answered your own questions. You buy gold using GBP. If it goes up in price 5%, but USD falls by 2%, when you sell, you will have made only 3% (broadly) growth on your GBP.

If "Reaper" comments on your post, I know he will tell you that almost any investment carries a currency risk - especially USD - because even a blue chip UK company has huge exposures to overseas assets and profits.

That's true. But buying gold gives you true, unadulterated, perfectly correlated exposure to the GBP/USD exchange rate, in addition to the 'normal' exposure to Gold prices.

I expect you are really asking if gold is likely to appreciate significantly more than the USD is expected to weaken (if indeed that is expected). I have no crystal ball. All I know is that investments can go down as well as belly-up.

turbobob

I tend to think of gold as a currency in its own right rather than something that's priced in US dollars.

purch

Yes.

What Gold or any other asset is priced in, only matters to the holder if they have an exposure to that currency.

getzegold

Gold is priced in all currencies. if you hold physical it shouldn't matter but if you hold paper in say a US ETF or US based Gold fund you will need to consider xchange rate changes.

sabretoothtigger

Gold rose in USA dollars in 2009 and in if you lived in Australia it fell in price. It just means Australia was a better investment, its a bit like a treadmill since you are not always going anywhere

You wont lose money just because dollars go down. US dollar index fell 11% since July and you know Gold seems to have risen alot.
In Japan gold gained like 2% only, thats closer to its real value not price gain and in euros I dont think gold rose at all so even savings would have been better

wellerway

Loughton_Monkey wrote: »

I expect you are really asking if gold is likely to appreciate significantly more than the USD is expected to weaken

This hits the nail on the head.

So any views on this welcome!

sabretoothtigger

the value of gold or anything will increase with supply vs demand. Gold will be more in demand as paper money and bonds weaken in their ability to maintain value.


You should read soros though, gold is a bubble. if you know of a good essential business invest in that instead