"Looking at the past it was clear that buying gold in dollars was the best play. Any thoughts for what currency would be best going forward? Many thanks"

Eoin Treacy's view Thank you for this interesting question. Gold has performed spectacularly well over the last decade against a wide number of currencies but how one ascertains which currency it has performed best against will depend on when you begin your comparison. I suspect that the answer will depend in large part on how you view gold. If one thinks of the yellow metal as simply another investment vehicle to trade in and out of then your perspective will be different to someone who sees gold as another currency or store of value. In addition one can use gold and its value as measured in other currencies as an analytical tool.

Investors and traders have taken an interest in gold, particularly over the last few years because of its relative strength in times of crisis and the fact that it has managed to churn out a positive US Dollar return on consecutive years. From their perspective, gold will be an asset to partake in when the time is right just like any other.

For others the fact that gold has appreciated not only in US Dollar terms but against just about every other currency as well over the last decade is a signal that gold is being remonetised in the eyes of investors and that it is more properly viewed from an investment perspective as a currency in its own right. We have often highlighted when gold is performing against a range of currencies because it is a reliable signal that investor interest is turning towards the metal. On such occasions the fact that gold is the most favoured of potential stores of value further bolsters the view that the metal is in a secular bull market. When gold is advancing against most currencies, it does best against the weakest.

Therefore, your question is more akin to which currency is going to be weakest against the US Dollar in future. However, since for this purpose, gold is a proxy for another currency, I am not at all sure why one would want to enter gold into the equation because you could simply short whatever your anticipated weak currency is against the US Dollar without complicating the trade by involving gold. For the US Dollar investor, the only reason I can think of that gold would be brought into the equation is because your answer is that the US Dollar is going to be the weakest currency in future and that gold offers the best safe haven in such a scenario.

Right now, gold is pulling back against most currencies which indicates that at least in the short-term, investors are less interested in its safe haven qualities.

Over the medium-term, the US Dollar Index fell from 2002 through to 2008 and appears to be in the throes of a lengthy, volatile base formation. Personally, I am not anticipating a repeat of the 2002-2008 circa 40% decline.

The Japanese Yen remains at levels which are difficult to justify from a fundamental or common sense perspective. It appears to be only a matter of time before the country's public deficits come more into focus and concerted selling pressure takes hold. Against the US Dollar, it has been ranging in the region of ¥90 since 2008 which are levels not seen since 1995. While the progression of US Dollar lower rally highs remains in place and the rate has encountered resistance in the region of the 200-day moving average on a number of occasions since 2007, these are extremely high levels for the Yen. A sustained move above ¥95 would confirm a return to Yen supply dominance. In such circumstances, provided gold remains within an overall uptrend, it could easily perform best against the Yen. However, from an investor's perspective, I suspect the optimal way to take advantage of this trade would be to simply short the Yen, while holding Gold in US Dollars.