Jim : Thank you very much for your most interesting and informative reply. I am pleased, at last, to see someone talking sense about gold in relation to the currencies.
To start at the end, I am aware of the pacific.commerce.ubc URL. In fact, I use it frequently but I have not seen gold, as measured in SDRs, demonstrated before. To tell you the truth, I wasn't sure what SDRs were! So, I found that extremely interesting and also very valid as yet another way to observe the gold price --- through the "looking glass"!
As you see from the table, 0.58 of 1.46 of the value of the SDR is still the $US (=40%) but the remaining 60% represents the other currencies. From this, one would imagine, if the gold price rose, when measured in SDRs, then that would be the true measure of whether the gold price was going up, or not --- because the measure is in ALL the major currencies, and not just the $US. That would then settle the apparent controversy as to which currency gives the best reflection of a rise in the POG. It would also avoid the apparent confusion as to why the price of gold goes up in a currency which is being devalued with respect to the dollar.
Apropos the US dollar index, I am rather surprised that the yen is weighted as little as it is (13.6%). I would have thought that the currency of the second most important world economy should have more emphasis than it apparently has. I am amazed that sterling (11.9%) is given such a high weighting. Clearly, the "index" was made many years ago when the UK was a major economic power and Japan a small one. I have made my "own" index, based on economic activity of the various countries, and there I do weight the yen far more significantly.
Of importance the Euro, which represents six of the mentioned currencies, will account for 61.8% of the value of the dollar. This is far too much. In my opinion, the Euro should have approximately the same weighting as Japan. Perhaps, just a bit more. But not almost five times.
Anyway, as you see, the SDR and Euro and dollar "index" are all just approximations. There are no absolute values for anything. They are all simply "baskets" of currencies --- which themselves do not have a constant value! |
