GoldMoney Alert - 1 April 2009

A Message from the Weak Currency

Sometimes it can be particularly useful to look at gold's chart pattern in terms of the weakest national currency. The reason is that gold is clearly identifying the major trend when viewed against the weakest currency, providing a message for what is to come for gold in terms of other currencies. It can be a useful forecast.

To explain this point, gold either climbs or falls against all the world's currencies, but it does so at different rates. See for example, the table presenting gold's rate of appreciation this decade against nine of the world's major currencies in the alert dated January 2, 2009. Gold is rising against all of these currencies, but doing so at different rates. Gold is rising at the fastest rate against the weakest currency, and is achieving the slowest rate of appreciation against the strongest currency.

For some time the weakest currency has been the British pound. For the eight years ending December 31, 2008, gold has risen at an average annual rate of 17.1%. This trend has continued in 2009, as gold is up 6.8% against the British pound so far this year.

Right now I think gold's chart in terms of pounds is telling us a lot about the future direction of the gold price for all the major currencies. Compare the following three charts carefully, which are presented below from the weakest currency to the strongest.

These charts show that gold is strongest in terms of the British pound. Gold is only 8.0% below its recent high in British pounds, but 10.3% and 11.8% below its recent high in terms of the Swiss franc and euro respectively. Gold is in an uptrend against all of these currencies, but is leading - appreciating at the fastest rate - against the British pound.

Nothing in these charts suggests that gold's uptrend has ended. So continue to expect new highs for gold, probably to be achieved first against the pound, followed soon thereafter by the Swiss franc and euro. I continue to expect a new record high for gold in terms of the US dollar too.

The first quarter has ended, and gold did not exceed or even reach US$1,003 as I had forecast. Nevertheless, its trend remains up, as is clear from the following chart. Note gold's "V" bottom on this chart that was discussed in the last alert, which is a very powerful and bullish chart pattern.

The bullish fundamental reasons driving gold higher remain in place. So continue to expect higher prices, and that US$1,000 will eventually be exceeded.

Published by GoldMoney
Copyright © 2009. All rights reserved.
Edited by James Turk

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