Be­twixt & be­tween

Finweek English Edition - - Cover Story -

IN­VESTORS AND SPEC­U­LA­TORS buy gold when they lose con­fi­dence in money, or if too much money is printed. About two years ago, the United States be­gan print­ing money at a phe­nom­e­nal rate and then the gold price rose to more than US$1 000/oz. But since year-end 2009, the US presses are run­ning much slower and the gold price is start­ing to set­tle down at just more than $1 000/oz. Now Europe is start­ing to print. The first tril­lion euro, mainly to help Greece to con­tinue its sin­ful life, are cur­rently be­ing printed – and again the gold price is start­ing to rise, this time to new record lev­els of more than $1 200/oz.

But that’s not re­ally the right yard­stick. Look at the gold price in euro, be­cause that’s the cur­rency be­ing printed too ex­ces­sively. The graph tells its own tale – and it’s dif­fi­cult to win an ar­gu­ment that gold no longer has any­thing to do with money.

An­a­lysts say cop­per is a much bet­ter mea­sure of the econ­omy than oth­ers who claim that ti­tle. If the price of cop­per rises it shows things are go­ing well in the world econ­omy. Of course, the op­po­site is also true. If the price of cop­per falls sharply – such as the 6% in one day last week – it’s a warn­ing that the prospects for the econ­omy are fall­ing.

By putting gold and cop­per on the same graph you can see two bed­time sto­ries at the same time. Look at the graph. Some­where around March the gold price warned: you’re print­ing too much money, es­pe­cially euro. The price of cop­per warned that prospects were fad­ing for world eco­nomic growth. This is a good graph and a use­ful item for the agenda at the monthly board meet­ing to shorten the end­less dis­cus­sions about the econ­omy.

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