Gold is hedge for currency devaluation

Do you need to hedge against currency devaluation?  Absolutely – Global central banks have been cutting interest rates and doing Quantitative Easing (aka “Money Printing) since the Global Financial Crisis in 2008. The end result of this is devaluation of your currency.

Currency Wars

Furthermore the devaluation of currency is intentional! Governments are in a race to the bottom to devalue their currencies. Devaluing a currency makes a country’s exports cheaper and stimulates the economy. The economy may win but wage earners will lose because your purchasing power has reduced.  IG markets gives more explanation about Currency Wars and why governments wage them.
Currency Wars Explained: A Guide to Devaluing Currencies

Compare your currency’s exchange rate to the USD and to the gold price and see how much your currency has devalued. For your convenience we have done the analysis for a selection of currencies below:

Malaysian Ringgit (MYR)

The Malaysian Ringgit has lost 40% of its value since 2011. Over the same time period Gold has increased 150%!

12 year chart from 2008 to 2020 showing devaluation of the Malaysian Ringgit against the US Dollar
MYR lost 40% from 2011 to 2020
12 year chart from 2008 to 2020 showing price of gold in Malaysian Ringgit
Gold in MYR gained 150% from 2011 to 2020

Singapore Dollar

The Singapore Dollar lost 11% of its value between 2018 and 2020. During the same time Gold price increased 35%.

SGD - USDSGD 2018-2020
SGD lost 11% from 2018 to 2020
SGD - XAUSGD 2018-2020
Gold in SGD gained 35% from 2018 to 2020

Australian Dollar (AUD)

The Aussie Dollar lost 20% of its value between 2018 and 2020. Over the same time frame Gold increased 51% !

Chart showing AUD/USD exchange rate and 20% devaluation of the Australian dollar
AUD lost 20% from 2018 to 2020
Chart showing gold price in Australian Dollars from 2018 to 2020 showing gold price up 50% in Australian Dollars and gold as an effective hedge against devaluation
Gold in AUD gained 51% from 2018 to 2020

Other Currencies

You can repeat the above analyses for other currencies and the results will be similar. So what do you think? Do you need a hedge for currency devaluation?

Turkey and India are buying gold to protect against currency devaluation – Read More

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