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Over the last couple of years, gold has hit record highs against all currencies. Countries with depreciating currencies were hardest hit. As an example, Canadians paid $1525.30 per ounce of gold on October 1, 2018. This morning, as of writing, that same ounce now costs $2627.40 while the record sits at $2728, set on May 4, 2023. While the Canadian dollar has remained fairly strong against other currencies, it has weakened against the U.S. dollar which sits just above 105 on the . The Canadian dollar presently stands at $O.7373 against the USD after hitting a 12 day high on Wednesday, thanks to soaring oil prices (see below as to why that is).
The last time I reported on gold hitting a new high against a currency, it was against the Australian dollar in a post published on March 17 of this year when it peaked at $2922 AUD. We can see that the Canadian and Aussie dollars hit new lows against gold mere months of each other. Now, the time has come to report on another well known currency that's touched a new low against gold, the Japanese Yen
Last week, gold in Yen hit a new high with prices hitting 10,100 Yen per gram. The Yen has done rather poorly against the USD in recent months. On January 7, 2021 the Yen peaked at .009705. Fast forward to today and it now sits at 0.006769. No wonder it costs more to buy gold in Japan. The culprit? Ultra loose central bank policies keeping rates at negative zero for the better part of the last decade. The Japanese Central Bank recently hinted at ending their loose policies in early 2024 should they meet their imaginary 2% target.
Good luck with that! In my recent article titled, 'Projected oil deficit next quarter signals higher gas prices', I showed that by the end of the year, OPEC will have cut oil production by almost a billion barrels. We're already seeing higher prices at the pumps since last spring when the production cuts started. On top of that, Japan's real inflation just surpassed that of the U.S.A., and I can tell you, it's about to get a lot worse.
Japan is a net importer of oil and gas but with a depreciating Yen, it's about to cost a lot more to import that energy into Japan.The massive oil squeeze by OPEC and led by Saudi Arabia sets oil on a course to surpass $100 per barrel again before year end but may likely go much higher. Rumors of $150 a barrel are circulating.
OilPrice.com, in a report published on March 7, 2022 suggested then that oil would eventually hit $150 and even go as high as $200 if we include the oil sanctions on Russia which only adds to the building oil squeeze. Oil had hit $130 a barrel earlier that week. As of writing, WTI crude is at $90.65 while Brent is at $93.81, a far cry from $130 so there is pent up energy just waiting to push prices higher. That pent up energy is the OPEC oil squeeze that is set to go in high gear in the final quarter of this year when they up their production cut from two to three million barrels per day.
Throwing gasoline into the fire, China and India are buying up a big chunk of the remaining oil from the Saudis so I expect some serious bidding to occur in the oil futures markets to secure supplies. November futures are already at a high for the year. This means Japanese citizens are about to pay a lot more for their energy needs when you factor in their depreciating currency set against soaring oil prices.
It's not just Japan, really. This is a worldwide event because obviously, oil is the most important factor regarding our energy needs and is not going away anytime soon. Compared to nuclear, hydro, coal, wind and solar, oil (gas) remains king. We should see a flurry of new record lows against gold this Fall from currencies around the world as we get closer to the end of the year. Will wee see new record highs for oil too?
Yet, there is an alternative for the Japanese in these trying times. Japan has about 846 tonnes of gold reserves. If gold skyrockets and it probably will as more people realize it's an excellent hedge against inflation, which by now is too obvious to ignore, we may very well begin seeing transactions that bypass currencies altogether in favor of gold in exchange for oil. Besides, who would want to trade their valuable oil for any worthless currencies anyway?
In fact, oil priced in gold has remained remarkably stable over the last 70+ years so it would make sense, wouldn't it?
Peace and love to everyone!
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Previous Posts:
European Central Bank hikes again to record 4%.
Massive oil deficit next quarter signal higher gas prices!
Loose lips sink ships. Your co-workers are not your friends.
Central bank gold buying spree not slowing down.
Canada holds rates steady at 5%.
Oil prices in gold remarkably stable for last 70+ years.
USA DEBT: $32 Trillion and counting...
San Francisco - Echoes of old Detroit
M2 money contraction + rate hike double lag effect
Silver's massive 237 million ounce deficit
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