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The 2008 Gold Correction Is History

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Times are too tight for jet-setting, so let's just take an imaginary trip around the globe for a moment. Don't worry -- the tickets are free.

Before we leave from New York, let's consider that gold remains more than $100 below its high above $1,030 in March, despite having mounted an impressive and speedy rally from its low beneath $750 in September. Relative valuations of currencies have a tremendous impact on price, and what in New York may appear to be the continuation of a nearly seven-month gold correction is something entirely different as our journey begins up north.

After enjoying parity with the U.S. dollar as recently as July, the Canadian dollar has fallen off sharply against the greenback in recent weeks. As a result, gold in Canada is fetching more than 1,060 Canadian dollars; a new high signaling the end of the correction up north. The Central Fund of Canada (AMEX: CEF  ) issued shares to purchase additional bullion. Canada is home to many of the world's best-known gold miners, like Barrick Gold (NYSE: ABX  ) and Goldcorp (NYSE: GG  ) , but to date these mining equities have considerably lagged the international breakout for gold bullion prices.

As we head to euroland, with a stopover in London, we see more of the same. Gold priced in euros and British pounds has vaulted back into uncharted territory. In Germany, gold dealers have reportedly stopped taking new orders amid "exploding demand," while in London, bullion dealers have reported lines out onto the street.

Now for the long leg of our travels, we move halfway around the globe to Australia, where the Perth Mint has doubled gold output in an effort to keep up with rising demand. Down Under, we find the most dramatic breakout of them all, with gold gaining more than 30% just in recent weeks. Not surprisingly, the Aussie dollar has dropped more than 20% against the U.S. dollar since late September. Following the pattern visible everywhere, Australian miners like Lihir Gold (Nasdaq: LIHR  ) and BHPBilliton (NYSE: BHP  ) have likewise been left out of the rally.

Keep in mind that the U.S. dollar index is merely a relative measure. But hold on to your hats, Fools. I believe gold as priced in U.S. dollars will not lag these international competitors for long.

Further Foolishness:

The "Gold" tag at Motley Fool CAPS lists 85 companies. Join the CAPS community to separate Fools' picks from fool's gold. CAPS is free and fun.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He owns shares of Central Fund of Canada and BHP Billiton. The Motley Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 10, 2008, at 3:23 PM, twentyheigt wrote:

    Gold is not available in retail. Why ? Because a lot of common people (you, me as individual little speculator) buy it. They are the last wagon of the train.

  • Report this Comment On October 10, 2008, at 3:36 PM, DGCmagazine wrote:

    And what will be the monetary result from the Trillions of new USDs they just flushed into the American system?

    Weimar Inflation within one year and a return to some link with gold.

    All the digital gold currency users I know are echoing the same quote:

    "Those who danced were thought to be quite insane by those who could not hear the music"

    We have been hearing the music loudly for several years now....can you hear it now?


  • Report this Comment On October 12, 2008, at 8:43 AM, irishstorm22 wrote:

    etf's? why mine's?

  • Report this Comment On October 16, 2008, at 2:21 PM, MicroBerto wrote:

    You are right, buying gold is a great idea, but not everyone knows the best ways to own it. It’s not safe to own too much under the mattress, so I wrote this article that gives you some options:

    Please add any thoughts or comments.


    (PS - I have a personal feeling that it will dip a bit when it gets sold off as people/funds dig for cash, and think low $700s will be the next entry point. But who knows, I’ve been wrong before!)

  • Report this Comment On July 11, 2009, at 8:16 AM, barbara789 wrote:

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  • Report this Comment On July 11, 2009, at 8:16 AM, barbara789 wrote:

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