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Currency Wars: Which Currency Played Out Best For Gold?

(Kitco News) - Although gold has lost value in major currencies across the board this past month, the metal has seen positive returns against some on a longer-term basis.

Based on Kitco's Gold-Currency charts, which display the gold price in multiple currencies, the yellow metal proved to be the biggest loser against the British pound in June, while gold in Swiss franc terms took the leading hit for the first half of the year. Gold in Russian ruble terms was not far behind the franc, and proved to be the most volatile.

The Kitco charts provide gold prices in multiple currency terms, including the U.S. dollar, euro, Swiss franc, British pound sterling, Japanese yen and Russian ruble, among other currencies.

According to the data, gold in GBP dropped 3.35% in the last 30 days, while gold/Swiss franc fell by only 0.6% over the same period.

"One [currency] that intrigues me is that in the last month, the pound has been weakening against gold when it seems to me it should strengthen," said Colin Cieszynski, senior market analyst for CMC Markets, adding that he expects the pound to outperform gold in the longer term.

While gold in GBP dropped about 3.8% in the first half of this year, gold in Swiss franc terms saw the largest drop, falling 7.65% in the past six months.

The euro and the yen, on the other hand, saw a rise in value for gold during the first half. Gold in euro terms increased by 6.08% in the past six months, while gold/JPY saw gains of roughly 0.05%. However, in the last 30 days, gold/EUR only experienced mere gains of 0.05%, while gold/JPY saw losses of 2.57%.

Cieszynski noted that he thinks the euro has already "bottomed out" and is starting to rebound.

"That's why we're seeing, even with all the turmoil in Greece, that gold hasn't gone up against euro," he said.

"The yen also has the potential to strengthen on the basis of not just U.S. dollar weakening, but also I do think eventually they'll slow down their quantitative easing program, but not yet," he said, commenting on the Japanese currency.

However, it is not all bad news for gold in the past month, especially for gold in Russian ruble terms, which saw gains of 0.49%.

"It's the ruble that's the outlier, no question about it," Cieszynski said. "Certainly, when we look at the Russian ruble, it seems to be particularly volatile against gold."

According to Cieszynski, unlike other resource-based currencies that are only sensitive to the oil price, the ruble is also affected by political risk in the country, which could explain its volatility.

Although the gold in RUB saw losses of roughly 7.47% for the first half of 2015, it was among the few currencies that saw gains over the last 30 days.

Aside from the euro and the ruble, the chart showed that the only other currency against which gold experienced gains was in Australian dollar terms, jumping by just 0.29% in June.

Gold in U.S. dollar terms, however, has been on the decline this year, with losses of 1.63% in the last 30 days, and 2.03% over the past six months.

"I think the U.S. dollar may weaken in second half as it becomes more clear that the Fed isn't about to raise rates imminently after all, while they have been threatening to do so," Cieszynski said. "If that was the case, and we did see the U.S. dollar start to weaken, that would supportive for gold."

Cieszynski added that he'll be closely watching oil to see where the ruble is headed next.

"I think the oil price is peaked for now and could come off in the second half of the year, so that could lead the Russian ruble to underperform."

By Sarah Benali of Kitco
Follow me on Twitter @SdBenali


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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