Euro loses value strongly against gold
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The current review of developments in financial markets shows that they are at least temporarily calming down after the panic in financial markets over the Japanese economic situation. But for how long?
Analysts on various sides argue that concern about a US recession is not justified, but JP Morgan raises the probability of the US falling into recession by the end of the year from 25 to 35 per cent. Geopolitical tensions in the world continue to escalate, both in Ukraine and in the Middle East. The tariff war, especially between the US and China, is taking on new dimensions, further complicating an already complex international situation.
The euphoria around artificial intelligence also seems to be waning, with many leading companies investing huge sums of money to keep up with the AI trend. But the results of these massive investments will only be well demonstrated in the future.
China’s hunger for raw materials continues
Recently, The Economist published an article on China and its growing need for raw materials due to population growth and industrial development. Despite its economic difficulties, the country continues to import large quantities of raw materials, reflecting concerns about new geopolitical threats. China is dependent on foreign resources, particularly for food, energy and raw materials.
Are digital currencies from central banks coming or not?
It is also interesting in the area of currencies and upcoming central bank digital currencies, where the 2 largest central banks in the world have completely different views on the introduction of digital currencies.
On the one hand, the bottom of the form Jerome Powell of the Fed explains that the US central bank does not have the authority to issue a digital central bank currency. At the moment, they are not interested in issuing their own currency.
The European Central Bank has a completely different view and is working on the ground to issue a digital euro. In cooperation with the national central banks of the euro area, they are studying the possibility of issuing a digital euro, which would be the electronic equivalent of cash.
What about the value of existing currencies?
Since 2000, the dollar has lost 45% of its purchasing power. This means that $100 in 2000 would today have the same purchasing power as about $182.45, an increase of $82.45 in 24 years.
It is the same with the euro. Since 1999, the euro has lost 42% of its purchasing power. This means that €100 in 1999 would today have the same purchasing power as about €171.96, an increase of €71.96 in 25 years.
Source: Pexels
Gold wins against the euro
Comparing gold with the euro, we quickly see an even greater decline in the purchasing power of our currency.
The euro has lost 89% of its value against gold since its inception
- In 1999, we got 124 mg of gold for 1 euro,
- In 2024, €1 gets just 12.7 mg of gold.
Source: Pexels
The gold price is an indicator of uncertainty
Gold is a very good predictor of economic instability and financial crises. Many analysts have used gold prices to predict economic problems, as gold often increases in value when there is uncertainty in other markets.
To mention Japan again. Many experts have warned of an increase in the price of gold compared with other currencies. When Japan’s problems surfaced, we got the answer to the question, because the movement in the price of gold can be indicative of broader economic trends and potential crises. It is the Japanese yen that has seen the strongest rise in the price of gold since the beginning of 2024.
Gold is a key portfolio component for the times we are in.
The newsletter “Financial insights and trivia” does not constitute an investment advisory service. Its content does not constitute recommendations to buy or offers to buy, but is intended to inform the public about developments in the financial field. Past returns are not a guarantee of future returns. Please consult a financial adviser for advice.