The table below compares a history of gold and silver prices with the Dow Jones index, the World GDP and the US debt.
The two instances that gold appeared to move backwards are post 1980 and post 1995. These two ‘drops’ are anomalies or as we prefer to call them ‘extraordinary’ events.
The rise in the 1980s was due to the crisis relating to hostages of the American embassy in Iran (ended in January 1981). If the crisis factor is removed then certainly the value of gold would have been somewhere between the 1975 and the 1985 price.
The drop in year 2000 is due to the excessive faith place in the performance of stocks. The Dow Jones exceeds 10,000 points and the investing public believes that stocks can deliver both security and yield.
This is considered another “extraordinary” event - If matters were treated rationally then the gold price would have been somewhere between the 1995 and the 2005 level.
Therefore, barring such events or perceptions, gold is steadily increasing in price. Unfortunately we cannot predict events similar to the Iran Hostage crisis.However, we can predict that the year 2000 perception about the performance and security of the stocks will not re-appear in the near future.Throughout history gold has frequently been used as of money, and, instead of quoting the gold price, all other commodities were measured in gold.
Following World War II a gold standard was established after the 1944 Bretton Woods conference.
This system held up until the 1971 ‘Nixon Shock’, when the US stopped the direct convertibility of the United States dollar to gold. Since 1968 the usual benchmark for the price of gold is known as The London Gold Fixing; a twice daily (telephone) meeting of representatives from five
Moreover, there is active gold trading based on the intra-day spot price, derived from gold trading markets around the world as they open and close over the course of the day.
The following table sets forth the gold price versus various assets and key statistics:
World GDP,USD tn
US Debt,USD bn
In March 2008, the gold price reached above $1000, reaching an all-time nominal high of $1002.80, which in real terms was still well below the $850 peak in 1980. It then fell, going as low as $709.50 in November, before resuming its upward trend, temporarily breaking the $1000 barrier again in late February of 2009.