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Gold Around the World

Gold’s Performance in different Currencies

The U.S dollar is the global reserve currency, so it is the price gold is normally measured in. However, many investors do not realize that physical gold is a currency itself, and its value depends on the currency it is being compared to. While the spot price of gold could be going down in U.S dollars, it could be shooting through the roof in Russian rubles or Turkish lira. 

Physical gold is used to store wealth. It is more stable than cash or real estate for this purpose, and over the long-term gold will outperform any paper currency. This article will explore the value of gold in five different currencies: The U.S dollar, U.K pound, Chinese renminbi, Russian ruble and Turkish lira. 

The U.S Dollar (2000 – 2016)

Gold has done pretty well in dollars over the last sixteen years. American investors who put their savings in bullion would have increased their gold-based wealth by over 3x in little over a decade. This is a better return than holding cash or stocks that may crash or go bankrupt. 

The Chinese Renminbi (2000-2016)

China is known for its low currency that keeps labor cheap and exports competitive. However, many would be surprised to see that physical gold performs better in the U.S than it does in China. 

Chinese investors who bought gold in 2000 would have seen their savings jump 279 percent over the last sixteen years compared to Americans who would be up 360 percent. Either way, Chinese investors prefer to hold gold over paper currency. They understand, perhaps more than anyone else, that paper money is not a good store of wealth over the long-term. 

The Chinese consume around 40% of all the gold produced in the world, and this number is growing. Gold imports into mainland China have growth 700 percent according to Statistics Department of Hong Kong. In a time when the country’s stock market is a disaster; the government constantly devalues the currency and the housing market is overheated Chinese investors have practically no other option but to invest in gold. 

The U.K Pound Sterling (2000-2016)

Historically, the British pound has been a much stronger store of value than currencies like the dollar or euro; however, the Brexit changed this. The pound tanked when U.K voted the leave the European Union. This event destroyed billions for British savers who stored their wealth in cash and stocks.  

On the flip side, gold investors saw the value of their savings rise astronomically after the Brexit. The metal is now up a good 457 percent since the year 2000. 44 percent of this increase came in the year of 2016 alone. 

The Russian Ruble (2000-2016)

Russia has been one of the greatest countries for gold investors over the last ten years. Russian physical gold investors benefited from both the sky-high commodities prices before the recession, the gold boom in 2011, and the recent commodity crash. Yes, gold has benefited from the commodity crash – at least in Russia. This is because when oil prices fell the Russian government, which is dependent on oil for revenue, went into a tail spin. It had to burn through its cash reserves and print vast amounts of new currency. The ruble collapsed as a result. 

The crash of the Russian ruble has resulted in the destruction of several decades-worth of Russian cash-denominated savings in the last three years alone. Stock investors also saw significant losses, especially if they were exposed to the energy sector. However, Russian investors who stored their savings in physical gold have seen their wealth rise an astronomical 938.1 percent since 2001. 

The Turkish Lira (1985-2016)

While currencies like the Russia ruble and U.K pound are bad stores of value, nothing can compare to the Turkish lira. 

The recent coup attempt in Turkey put the nation’s currency into freefall. It is likely that there will be further losses in this currency as concerns about ISIS and the escalating war on its border with Syria, mount. While the last four currencies were shown in a ten-year window, this next chart will show the returns gold has given Turkish investors since 1985. 

Turkish investors who have held physical gold over 30 years have seen their purchasing power increase a jaw-dropping 4,671,000 percent. 1,000 lira worth of gold would have become over 4 billion liras today. A similar situation can be found in most developing countries. The example of Turkey illustrates the superiority of physical gold as a store of wealth.