Gold in Euros Set for Takeoff
A commentary on recent events by National Gold Group’s Michael Carr – November 30, 2012
Gold is usually considered to be the ultimate currency by modern-day investors, just as it has been for centuries. Throughout history, gold has had buying power meaning that coins and bars have been readily convertible into any tangible good. This is true in any culture and in any country. Gold is actually priced in every major currency around the world and an evaluation of gold when valued relative to euros highlights a buying opportunity in gold.
Rather than looking at the price of gold in euros, this indicator looks at the relative valuation. In many ways, this indicator is similar to the commonly used price-to-earnings (or P/E) ratio used by stock market investors. When the P/E ratio is low, many investors consider that to be the time to buy. This indicator highlights buying opportunities by showing when gold is undervalued. The same concept applied to gold is shown below and it shows that gold is trading at a low valuation right now making it a buy.
This is only one indicator that we should consider when assessing the gold market. However it has reliably pinpointed buying opportunities in the past, which are highlighted by vertical bars in the chart above.
Gold has been in a trading range over the past year. This fact alone indicates that gold is not at an extreme value. Gold looks ready to move higher based on a number of fundamental and technical factors. With the European Central Bank racing to create more money than the Federal Reserve, gold seems destined to be the only currency that allows investors to retain their buying power.
The above commentary is for informational purposes only and is not a solicitation by National Gold Group or Michael Carr. It is the commentator’s opinion only and not intended for investment recommendations, and does not necessarily reflect the views of National Gold Group. Any references to outside sources are believed accurate. Past performance is not a guarantee of future results. All commodities involve risk. Investors should consult their financial advisor before making any investment decisions.