Sterling Hasn't Been Golden this Year

Real-time Monetary Inflation (last 12 months): 4.0%

Following the lead of the U.S. Federal Reserve, European and British central bankers held interest rates at their record lows Thursday as the Continental economies continue to struggle out of recession.

Things are especially tough in Old Blighty. Last week, while the U.S. reported real growth in its gross domestic product for the first time in a year, Britain's third-quarter statistics showed recession still gripping its economy. Eurozone figures, due out next week, are widely expected to exhibit growth.

This year, gold has been a bellwether in this differential economic calculus.

The metal may have reached new heights in dollar terms, but has actually fallen from an earlier pinnacle attained against the British pound and the euro.

Year-to-date, gold's appreciated by 21.9 percent when measured in dollars. Versus sterling, the metals gain is only 7.8 percent. Much of the difference is due to inflationary expectations. The U.S. has been a lot more aggressive with its monetary fiddling than the U.K.

The stimulus is apparently having a salutary effect on the American economy, and fears of the future liquidity mop-up abound. The Brits are playing catch-up in this race.

Look over the course of a full 12 months, however, and you'll see gold appreciation in dollars and pounds is pretty much even-steven.

Gold Price - Dollar Vs. Pound

Since November 2008, gold's gain against the greenback's been 45.7 percent; in sterling, gold's up 43.4 percent.

It's been quite a roller coaster ride for the pound. And if history is any guide, there'll be more thrills and spills to come.

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