Societe Generale have put together a report on how to value gold, in comparison with a variety of other assets and market influencers.
The breakdown looks at the relationship between gold and multiple currencies, between gold and dollar debasement, gold and inflation, and gold and the bond market.
For anyone interesting in investing in the asset, the breakdown offers a clear view of the reasons you may want to invest in gold and some of the influencers you need watch before you jump in.
First, here's where we stand in terms of gold pricing. We're not yet at the 1980's highs, in real terms.
Note: India, Mexico, Australia, and Canada all have the highest correlations to gold prices in 2010.
Gold mining companies have followed gold prices as well, and many of those are located in top gold price-correlation currency areas.
In the U.S., long-term inflation fears are rising, and long-term bonds are already starting to price this in.
This is evidenced in the U.S. bond market's relationship with the gold market, where gold tends to rise with negative real rates in high inflation environments.
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