Gold Is Testing Its 2011 High

Gold is testing its 2011 high in Australian dollar (A$) terms.

The A$-denominated gold price (gold/A$) made a correction low in April of 2013, spent about 18 months forming a base and then resumed its long-term bull market in late-2014. It will probably soon make a new all-time high.

It is useful to follow gold’s performance in terms of the more-junior currencies, for two main reasons. First, gold tends to bottom in terms of these currencies well before it bottoms in terms of the senior currency (the US$). Second, money can sometimes be made by owning the stocks of gold-mining companies operating in countries with relatively weak currencies even when the US$ gold price is in a bearish trend.

A good example is Evolution Mining (EVN.AX), an Australia-based mid-tier gold producer that I’ve followed at TSI for the past few years. As illustrated by the following chart, EVN commenced a powerful upward trend in late-2014 after basing over the preceding 18 months (just like gold/A$). It is now well above its 2011-2012 peak.

As a gold bull market progresses, the more junior currencies and especially the commodity currencies begin to strengthen relative to the US$. This causes the mining companies with operations in the US to start doing relatively well.