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Here’s why Gold will drop below $ 1,000 USD again

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Gold Price History from 30 B.C. to Today

Historical Gold Prices in the Roman Empire, Great Britain, and the United States

Gold Price History from 30 B.C. to Today
Historical Gold Prices in the Roman Empire, Great Britain, and the United States
An employee arranges one kilogram gold bars at a mint refinery in Australia.

BY KIMBERLY AMADEO
Updated September 17, 2020

Gold has been considered precious throughout history, but it wasn’t used for money until around 550 B.C.1 At first, people carried around gold or silver coins. If they found gold, they could get the government to make tradable coins out of it. Because of its value and its usefulness as currency, the evolving value of gold can be traced back as far as 30 B.C.

This article tracks the price of gold from 30 B.C.

Roman Empire
Emperor Augustus, who reigned in ancient Rome from 31 B.C. to 14 A.D., set the price of gold at 45 coins to the pound. In other words, a pound of gold could make 45 coins. The next revaluation occurred in the period of 211-217 A.D., during the reign of Marcus Aurelius Antoninus. He debased the value to 50 coins for a pound of gold, reducing the value of each coin and making gold worth more. From 284 A.D. to 305 A.D., Diocletian further debased gold to 60 coins per pound.

Constantine the Great debased it to 70 coins per pound in the years 306 A.D. to 337 A.D. They did this to finance the military so they could stay in power. They also increased taxes.

These emperors lowered the value of the currency so much that it created hyperinflation. To give you an idea, in 301 A.D., one pound of gold was worth 50,000 denarii, which is another coin based on silver. By 337 A.D., it was worth 20 million denarii.2

As the price of gold rose, so did the price of everything else. Middle-class people could not afford their daily needs and empires crumbled.

Great Britain
In 1257, Great Britain set the price for an ounce of gold at 0.89 pounds. It raised the price by about 1 pound each century, as follows:

1351 – 1.34 pounds
1465 – 2.01 pounds
1546 – 3.02 pounds
1664 – 4.05 pounds
1717 – 4.25 pounds3

In the 1800s, most countries printed paper currencies that were supported by their values in gold. This was known as the gold standard. Countries kept enough gold reserves to support this value. The history of the gold standard in the United States began in 1900. The Gold Standard Act established gold as the only metal for redeeming paper currency. It set the value of gold at $20.67 an ounce.

Great Britain kept gold at 4.25 pounds per ounce until the 1944 Bretton-Woods Agreement.5 That’s when most developed countries agreed to fix their currencies against the U.S. dollar since the United States owned 75% of the world’s gold.

United States
Before the Gold Standard Act, the United States used the British gold standard. In 1791, it set the price of gold at $19.49 per ounce but also used silver to redeem currency. In 1834, it raised the price of gold to $20.69 per ounce.

Defense of the gold standard helped cause the Great Depression. A recession began in August 1929, after the Federal Reserve raised interest rates in 1928. After the 1929 stock market crash, many investors started redeeming paper currency for its value in gold. The U.S. Treasury worried that the United States might run out of gold. It asked the Fed to raise rates again. The rise in rates increased the value of the dollar and made it more valuable than gold. It worked in 1931.

Higher interest rates made loans too expensive. That forced many companies out of business. They also created deflation, since a stronger dollar could buy more with less. Companies cut costs to keep prices low and remain competitive. That further worsened unemployment, turning the recession into a depression.

By 1932, speculators again turned in money for gold. As gold prices rose, people hoarded the precious metal, sending prices even higher.

To stem the redemption of gold, President Franklin D. Roosevelt outlawed private ownership of gold coins, bullion, and certificates in April 1933. Americans had to sell their gold to the Fed.

In 1934, Congress passed the Gold Reserve Act. It prohibited the private ownership of gold in the United States. It also allowed Roosevelt to raise the price of gold to $35 per ounce.8 This lowered the dollar value, creating healthy inflation.

In 1937, FDR cut government spending to reduce the deficit. This reignited the Depression. By that time, the government stockpile of gold tripled to $12 billion. It was held at the U.S. Bullion Reserves at Fort Knox, Kentucky, and at the Federal Reserve Bank of New York.

In 1939, FDR increased defense spending to prepare for World War II, and the economy expanded. At the same time, the Dust Bowl drought ended. The combination ended the Great Depression.

In 1944, the major powers negotiated the Bretton-Woods Agreement, making the U.S. dollar the official global currency. The United States defended the price of gold at $35 per ounce.

In 1971, President Nixon told the Fed to stop honoring the dollar’s value in gold. That meant foreign central banks no longer could exchange their dollars for U.S. gold, essentially taking the dollar off the gold standard. Nixon was trying to end stagflation, a combination of inflation and recession. However, inflation was caused by the rising power of the dollar, as it had now replaced the British sterling as a global currency.

In 1976, unhinged from the dollar, gold quickly shot up to more than $120 per ounce.

By 1980, traders had bid the price of gold to $594.92 as a hedge against double-digit inflation. The Fed ended inflation with double-digit interest rates but caused a recession. Gold dropped to $410 per ounce and remained in that general trading range until 1996 when it dropped to $288 per ounce in response to steady economic growth. Traders returned to gold after each economic crisis, such as the 9/11 terrorist attacks and the 2001 recession.

Gold shot up to $869.75 per ounce during the 2008 financial crisis. The price of an ounce of gold hit a (then) record of $1,917.90 in August 2011. Investors were worried about a U.S. debt default. Since then, it has fallen, as the U.S. economy has improved and inflation remains low.

Because people want a safe haven when an economic crisis hits, they wonder “Should I buy gold?” To answer this, one must know what causes gold prices to rise and fall before investing in this asset.

Gold Prices by Year
The below chart tracks the price of gold since 1929, compared to the Dow Jones Industrial Average, inflation, and other factors.

Year Gold Prices (London PM Fix) Dow Closing (Dec. 31) Inflation (December YOY) Factors Influencing Price of Gold

The below chart tracks the price of gold since 1929, compared to the Dow Jones Industrial Average, inflation, and other factors.

Year

Gold Prices (London PM Fix) Dow Closing (Dec. 31) Inflation (December YOY) Factors Influencing Price of Gold
1929 $20.63 248.48 0.60% Recession
1930 $20.65 164.58 -6.40% Deflation
1931 $17.06 77.9 -9.30% Depression
1932 $20.69 59.93 -10.30% Depression
1933 $26.33 99.9 0.80% FDR takes office
1934 $34.69 104.04 1.50% Expansion, Gold Reserve Act
1935 $34.84 144.13 3.00% Expansion
1936 $34.87 179.9 1.40% Expansion
1937 $34.79 120.85 2.90% FDR cut spending
1938 $34.85 154.76 -2.80% Contraction until June
1939 $34.42 150.24 0.00% Dust Bowl drought ends
1940 $33.85 131.13 0.70% Expansion
1941 $33.85 110.96 9.90% U.S. enters WWII
1942 $33.85 119.4 9.00% Expansion
1943 $33.85 135.89 3.00% Expansion
1944 $33.85 152.32 2.30% Bretton-Woods Agreement
1945 $34.71 192.91 2.20% Recession follows WWII
1946 $34.71 177.2 18.10% Expansion
1947 $34.71 181.16 8.80% Expansion
1948 $34.71 177.3 3.00% Expansion
1949 $31.69 200.13 -2.10% Recession
1950 $34.72 235.41 5.90% Expansion, Korean War
1951 $34.72 269.23 6.00% Expansion
1952 $34.60 291.9 0.80% Expansion
1953 $34.84 280.9 0.70% Eisenhower ends Korean War, recession
1954 $35.04 404.39 -0.70% Contraction ends in May, Dow returns to 1929 high
1955 $35.03 488.4 0.40% Expansion
1956 $34.99 499.47 3.00% Expansion
1957 $34.95 435.69 2.90% Expansion until August
1958 $35.10 583.65 1.80% Contraction until April
1959 $35.10 679.36 1.70% Expansion, Fed raises rate
1960 $35.27 615.89 1.40% Recession, Fed lowers rate
1961 $35.25 731.14 0.70% JFK takes office
1962 $35.23 652.1 1.30% Expansion
1963 $35.09 762.95 1.60% LBJ takes office
1964 $35.10 874.13 1.00% “Goldfinger” depicts plan to control Fort Knox gold
1965 $35.12 969.26 1.90% Vietnam War
1966 $35.13 785.69 3.50% Expansion, Fed raises rate
1967 $34.95 905.11 3.00% Expansion
1968 $41.10 943.75 4.70% Expansion, Fed raises rate
1969 $35.17 800.36 6.20% Nixon took office, Fed raises rate
1970 $37.44 838.92 5.60% Recession, Fed lowers rate
1971 $43.48 890.2 3.30% Expansion, wage-price controls
1972 $63.91 1,020.02 3.40% Expansion. Stagflation
1973 $106.72 850.86 8.70% Gold standard ends
1974 $183.85 616.24 12.30% Watergate, Ford allows private ownership of gold
1975 $140.25 852.41 6.90% Recession ends, stocks rise, gold fall
1976 $134.50 1,004.65 4.90% Expansion, Fed lowers rate
1977 $164.95 831.17 6.70% Expansion, Carter takes office
1978 $226.00 805.01 9.00% Expansion
1979 $512.00 838.71 13.30% Fed’s stop-go policy worsens inflation
1980 $589.75 963.99 12.50% Gold hits $850 on 1/21, investors seek safety
1981 $397.50 875 8.90% Gold Commission
1982 $456.90 1,046.54 3.80% Recession ends, Garn-St. Germain Act
1983 $382.40 1,258.64 3.80% Expansion, Reagan increases spending
1984 $309.00 1,211.57 3.90% Expansion
1985 $326.55 1,546.67 3.80% Expansion
1986 $396.13 1,895.95 1.10% Expansion, Reagan tax cuts
1987 $484.10 1,938.83 4.40% Expansion, Black Monday crash
1988 $410.25 2,168.57 4.40% Expansion
1989 $398.60 2,753.20 4.60% S&L Crisis
1990 $392.75 2,633.66 6.10% Recession
1991 $353.20 3,168.83 3.10% Recession ends
1992 $332.90 3,301.11 2.90% Expansion
1993 $391.75 3,754.09 2.70% Expansion
1994 $383.25 3,834.44 2.70% Expansion
1995 $387.00 5,117.12 2.50% Expansion
1996 $369.25 6,448.27 3.30% Expansion, investors turn to stocks
1997 $290.20 7,908.25 1.70% Expansion
1998 $287.80 9,181.43 1.60% Expansion
1999 $290.25 11,497.12 2.70% Expansion, Y2K scare
2000 $274.45 10,786.85 3.40% Stock market peaks in March
2001 $276.50 10,021.50 1.60% Recession, 9/11
2002 $347.20 8,341.63 2.40% Expansion, 9-year gold bull market starts
2003 $416.25 10,453.92 1.90% Expansion
2004 $435.60 10,783.01 3.30% Expansion
2005 $513.00 10,717.50 3.40% Expansion
2006 $632.00 12,463.15 2.50% Expansion
2007 $833.75 13,264.82 4.10% Dow peaks at 14,164.43
2008 $869.75 8,776.39 0.10% Recession
2009 $1,087.50 10,428.05 2.70% Recession ends, gold hits $1,000 per ounce on Feb. 20
2010 $1,405.50 11,577.51 1.50% Obamacare and Dodd-Frank
2011 $1,531.00 12,217.56 3.00% Debt crisis, gold hits record $1,917.90 in August
2012 $1,657.50 13,104.14 1.70% Expansion, gold falls, stocks rise
2013 $1,204.50 16,576.55 1.50% N/A
2014 $1,206.00 17,823.07 0.80% Strong dollar
2015 $1,060.00 17,425.03 0.70% Gold falls to $1,050.60 on Dec. 17
2016 $1,145.50 19,762.60 2.10% Dollar weakens
2017 $1,291.00 24,719.22 2.10% Dollar weakens
2018 $1,279.00 23,327.46 1.90% Dollar strengthens
2019 $1,514.75 28,538.44 2.30% COVID-19 outbreak

Note: Between 1929 and 1967, annual average gold prices are used. December monthly gold price averages are used from 1968 to 1974. Last business day of December is used from 1975 on.

In January 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. By August 7, 2020, gold reached a new all-time record of $2,062,50 an ounce.

Source: The Balance

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