Gold Knew It All Along – Euro Falling Apart in Yellow Metal Terms

Gold Knew It All Along – Euro Falling Apart in Yellow Metal Terms

Earlier today, we wrote about the near-breakout in European bond spreads, and highlighted the euro’s potential breakdown versus the buck.

Our pal Brian Hunt, though, has astutely pointed out in his always-excellent Market Notes column that the euro has not been holding steady – it’s been falling apart!

You see, one of the big myths in the marketplace is that despite its colossal government debt and welfare problems, Europe’s pan-continent currency, the euro, is holding steady right now. Many analysts wonder how the heck it can manage to do this while facing problems like Greece’s debt default… which will be followed by more defaults.

We say, look again: The euro is plummeting in value. You see, the problem with conventional euro price quotes is they value the currency against other weak paper currencies like the U.S. dollar and the British pound. Gold, on the other hand, is “real money” (even “The Greatest Currency Trade of the Millennium“). But it’s not used in the conventional calculation.

Regular readers know we don’t have much use for convention. That’s why we pass along the chart below. It’s the past two years of euro action in gold terms. As you can see, the euro isn’t at all holding steady like most folks think. It’s in a “falling apart” bear market when priced in gold… and it will continue to grind lower.

euro priced in gold june 2011Source: DailyWealth