According to the latest news on gold today, gold investment is turning out to be more recognized by a group of industry onlookers as an alternative for currency. Michael Purves, Chief Global Strategist and Head of Derivatives Research, BGC Partners urges a few remarks on the price of gold with the investment proposal that gold should be considered as a currency.
"What is driving the appreciation in gold over the last several years is a need by a wide range of investors for a currency that is hard money, in other words not controlled by central bankers."
"A currency is defined by how much goods and services it can purchase. In 1979 when gold had completed a nice aggressive rally and finished up at $500 (per troy ounce) if you compare what an ounce of gold bought you in 1979 versus today, gold is still dramatically cheaper today. For example if you look at its relationship to how much of the Dow Jones Industrials it would buy you it is about one sixth today, in other words gold is one sixth as expensive as it was in 1979 at $500 (per troy ounce)," – in terms of relative prices and with the situation.
Brazilian Finance Minister Guido Mantega illustrated the fiat currency matter as a currency war earlier this year, which has been verified by the deflation of the Swiss franc and the additional Currency Exchange Rate Oversight Reform Act recently, pleading the US government to reprimand China for its accountability in currency handling.
Director of Government Affairs for the World Gold Council, Natalie Dempster, also provided a remarkable comments concerning gold price relative to currency devaluation:
"If we look at the current macroeconomic situation it is very evident just now. What gold doesn't have is it doesn't have credit risk. Many reserve managers bought euro bonds in good faith and are now looking at a 50 percent haircut on Greek debt or even a possible outright default. With respect to cash, they have a situation where fiat money is being undermined by the printing presses. While gold doesn't offer a yield, if you look at yields on cash just now they are strongly negative around the world."
Mario Draghi, the newly appointed president of the European Central Bank, has shockingly chose to lessen interest rates by 25 basis points to 1.25 percent with a reproving justification that the Eurozone may undergo a "mild recession" throughout the fourth quarter of this year. A news conference covered the policy change where the management of the bank gave details.
"The underlying pace of monetary expansion continues to be moderate. After today's decision inflation should remain in line with price stability over the policy relevant horizon. Owing to their unfavorable effects on financing conditions and confidence, the ongoing tensions in financial markets are likely to dampen the pace of economic growth in the euro area on the second half of this year and beyond. The economic outlook continues to be subject to particularly high uncertainty and intensified downside risks."
