- How gold will benefit from a currency war!
by Myra P. Saefong, http://www.marketwatch.com/
SAN FRANCISCO (MarketWatch) — Talk of a so-called currency war has been heating up, and it might finally light a fire under gold, too.
Efforts by countries such as Japan to boost growth with massive stimulus programs — which in turn have devalued their currencies, an aid to exports — can benefit prices for gold. These have started to alter the precious metal’s relationship with the foreign-exchange market and expand its role as a safe-haven asset.
“We are now moving irrevocably to a time when gold will measure currencies, not currencies measure gold,” said Julian Phillips, a South Africa-based contributor and founder at GoldForecaster.com. Read: Michael Casey: Japan needs a weaker yen.
Historically, the precious metal trades inversely to the U.S. dollar, as it did on Thursday and Friday. It was a usual story: gold prices fell sharply as the greenback strengthened at the expense of the euro on Thursday and as the Japanese yen weakened on Friday. See Friday’s story: Gold settles sharply lower, down over 3% on week.
But as various currencies become devalued, gold may take on an even stronger role as a haven. “We are about enter a phase in the gold price where it will rise against all currencies,” said Phillips. “The loss of the Swiss franc and the Japanese yen as ‘safe-haven’ currencies, as [the countries] forced their currencies to weaken, has made us all realize national currencies are the same animal in different guises.”