Chart of the Week: Gold’s Breakout

We continue to be encouraged by the price action of gold in the face of a strengthening U.S. dollar. Typically, gold and the dollar move in opposite directions, but so far this year gold is up more than 6 percent, reaching a year-to-date high on Monday. At the same time the dollar has appreciated about 4 percent.

Gold has also been appreciating against other major currencies in the developed world, as the chart above shows. The eurozone, Britain and Japan are all struggling with rising fiscal deficits and the after-effects of the global financial crisis.

In fact, the price of gold in euros made another record high last week as the worry of a sovereign debt default by Greece and other indebted countries in Europe continues to threaten the stability of the continent’s primary currency.

In our view, this gold breakout against the world’s primary paper currencies highlights gold’s growing allure as a store of value against further currency debasement caused by governments spending with little restraint. Gold appears to be reassuming its role as an alternative currency unencumbered by political liabilities.

About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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