Gold Prices Over Time
People have been mining gold for 7000 years and using it as currency for thousands. It is rare, can only be mined and not produced, and makes beautiful jewelry.
People in the Americas valued gold before contact with the old world. Gold has meant wealth all over Europe, Asia, Africa, and the Americas for a long time. Coins are also very old, although not nearly as old as gold.
Has Gold Always Been Valuable?
Gold’s value rose and fell from one decade to another in the past. Even in the Roman era, gold went up and down in value. This was still going on when the British had an empire, and it still is today.
In modern times, people buy gold when they feel threatened. A sudden, negative event such as the COVID-19 pandemic will make people buy gold.
A negative event doesn’t guarantee that gold will go up in price. The 9-11 attacks didn’t lead to the big price increase one would expect. However, the price of gold did increase a lot in the 2000s, perhaps because of the cost of the wars.
Instability makes paper currency seem fake and worthless, leading to higher gold prices. There is a good chance that gold will appreciate if something bad happens, though this is not a guarantee. Gold has always fluctuated in value, but it is relatively stable compared to currency.
Did the value of gold change in the ancient world?
At least as far back as the Roman era, emperors could devalue their currency. Forty-five coins first equaled a pound of gold, with this increasing to 50, 60, or 70 coins over a few decades. Emperors could devalue the currency to pay their debts and expenses.
Towards the end of the empire, much more dramatic inflation occurred. A pound of gold increased in value from fifty thousand denarii to twenty million denarii in a few decades. Rapid inflation is nothing new.
Inflation in Britain Before World War 2
The price of an ounce of gold increased by about 1 pound per century from the 1200s to the 1700s. An ounce of old was worth 0.89 pounds in 1257; it went up gradually from there to 4.25 pounds in 1717. Currency has a tendency to become worth less and less compared to gold over time.
Gold remained at 4.25 pounds per ounce for a long time – until as recently as 1944, when the value of a pound stopped being fixed. Today, a pound is worth much less gold.
Price of Gold in the USA Over Time
Before the 1930s, the U.S. dollar was also on the gold standard. You could redeem U.S. dollars for gold. However, this came to an end during the great depression.
After the 1929 stock market crash, many people became scared that their paper money would soon be worthless and began exchanging it for gold. Running out of gold was a serious possibility, so the government needed a plan to prevent the treasury from running out.
They decided to raise interest rates. This made the value of a dollar increase until it was worth more than the gold your could exchange it for. In the short run, this worked – people stopped asking for gold.
However, high-interest rates hurt businesses. Business failures led to unemployment, and poor economic times caused businesses to hire a minimum number of workers to minimize expenses. The great depression went on for much longer than it might have.
President Roosevelt insisted on the gold reserve act and made it illegal for private citizens to own gold anywhere in the country. Under the gold reserve act, everyone had to sell their gold. People had to sell their gold for less than it was worth.
The price of gold increased, and the price of the dollar went down, creating inflation that was good for the economy at that time. The end of the 1930s drought and the beginning of world war 2 ended the great depression. By 1944, the United States had three-quarters of the gold in the world.
However, the gold standard didn’t last forever. In 1971, President Nixon decided that foreign banks could no longer exchange U.S. dollars for gold.
The U.S. dollar was more and more powerful, as it had replaced the pound as the closest thing to a global currency. This led to inflation, which caused a recession.
Nixon removed the dollar from the gold standard to prevent further inflation. However, the U.S. dollar never went back to the gold standard. This means that the federal reserve could theoretically print it until it becomes worthless.
Is it a Good Time to Invest in Gold?
Gold went up a lot in 2020 due to the possibility of a war in Iran and the coronavirus pandemic. While the pandemic may be winding down, gold may continue to increase.
For better or for worse, a lot of U.S. dollars were printed in 2020. While a lot of the money went to people who needed it the most, it also raised housing costs.
People trust the dollar less and are buying gold to protect themselves against inflation. If even more money is printed in 2021, the dollar might lose even more value.
Bitcoin is also worth far more than it was before. Bitcoin seemed past its peak before the pandemic brought it to new heights. Gold has not seen such a large price increase, but it presumably will if the U.S. dollar collapses.
Possibly, the U.S. dollar will not lose a huge amount of value any time soon. In that case, gold will not be worth much more in the near future. Investors would behave differently if they thought there was going to be a massive dollar crash.
However, money printing continues. Now might be a good time to buy gold. Even if the pandemic slowly fades away, the dollar might continue to weaken for quite a while. You can even sock away gold in your retirement account – view this entry to read about how gold ira investing is becoming a way to hedge vs. inflation.
Is Gold a Good Investment?
If you are looking to make a huge amount of money from something that will massively increase in value, it might not be a great idea. However, gold may be good as a safe long-term investment. An ounce of gold is still worth as much as it was 50 or 100 years ago; a dollar surely isn’t.
Some people expect the U.S. dollar to become worthless someday, in which case everyone will want gold. It might be a gold-backed currency, and not Bitcoin, that replaces the dollar if it goes down.