As we tend to look at gold's performance in dollars, it is easy to forget that it also has a price in other currencies. We know that gold set records in dollar terms, but how did it perform in other countries?
In most currencies, the performance was even better. For example, gold also had a record year in Australia, helping to protect Australian investors from the rapid depreciation of their currency.
Gold, whose price is expressed in dollars, ranked as one of the best-performing assets in 2024. In Australia, it was by far the best-performing asset. The price of gold rose 38 percent in Australian dollars (AUD) in 2024, outperforming global stocks by about 10 percent. According to the World Gold Council, “strong investment demand, rising geopolitical risks, and a weaker Australian dollar supported gold's recovery.”
The dollar: the cleanest dirty shirt in the laundry.
This sharp rise in the price of gold mainly reflects the rapid devaluation of the Australian currency, which fell nearly 10 percent against the dollar.
As you are reminded every time you go to the store, the value of the dollar is rapidly depreciating. Unfortunately for many, other fiat currencies around the world are devaluing even faster.
People often refer to the dollar as the cleanest dirty shirt in the laundry. It is devaluing, but not as quickly as many other world currencies. But do you really want to wear a dirty shirt?
Gold is the clean shirt stored in the drawer. It retains its value as fiat currencies, including the US and Australian dollars, depreciate. Gold is real money, as evidenced by its performance during the recent inflationary surge.
Analysts at the World Gold Council expect gold to continue to perform well for Australians in 2025. The yellow metal has already risen another 4 percent in Australian dollar terms.
The Australian central bank is expected to start cutting interest rates. It has kept them stable, even as the Federal Reserve has eased them. Meanwhile, the Australian economy has been in crisis. According to the WGC (World Gold Council), “restrictive financial conditions, declining real incomes, and cooling momentum in the housing sector weighed on Australian growth in 2024. Even if the markets are right about the cuts, the absolute level of rates and their lagged impacts could continue to undermine the resilience of the economy.”
"In conclusion, after an exceptionally strong year, we believe gold has the potential to continue to shine in 2025. Although this year's macroeconomic environment may bring some headwinds, the global geopolitical landscape and risks stemming from financial markets are sure to attract the attention of official institutions and retail investors. Meanwhile, the potential risk of Australian dollar weakness could make gold more attractive in local investors' portfolios. And in the long term, we anticipate that gold will offer stable returns in line with global nominal GDP growth."
Gold's performance in AUD underscores its role as a hedge against inflation. While the dollar may be stronger, it is not strong. US investors should keep this in mind when adjusting their portfolios for the coming years.
Mike Maharrey, Money Metals