The gold story has do to somewhat with a general commodity boom that started around 2000. But the legs that carried gold price to a high of US$1920 in 2011 certainly had to do with the current financial crisis and loose monetary policy run by major economies.
The Singapore Dollar’s rally also had to do with both reasons. Singapore is an economy that depends on imports for just about everything. Both commodity price rallies and loose monetary policy carried out by major trading partners can cause inflationary pressures on Singapore. Therefore MAS manages the Singapore Dollar’s exchange rates to curb imported inflation. In an inflationary environment, the SingDollar is allowed to strengthen.
Strengthening Singapore Dollar made gold cheaper
If you live in Singapore, earn an income in Singapore Dollars, are passionate about long term investment prospects for gold, the convergence of these two bull runs are definitely in your favour. That is because if the SingDollar exchange rate stayed put today at the USDSGD exchange rate of 1.8460 at the beginning of January 2002, Gold will cost a lot more to buy.
Price of Gold using Singapore Dollar exchange rate now and then
Back on 01 January 2002
Singapore Dollar exchange rate (USDSGD)
Price of gold now in US Dollars
Price of gold in Singapore Dollars
How much more expensive?
What does this mean for gold investors?
MAS letting the Singapore Dollar appreciate to curb rising inflationary pressure is favourable to individuals who participate in long term gold investment.