The History Gold Prices – Spot Gold Price Continues To Increase
The increase in the gold price and other precious metals is not directly linked to one single circumstance. History has shown that many different negative economical and political situations have a positive effect on the spot price of gold. Increasing inflation, the growing national debt, low interest rates, political unrest and the weakness of the US dollar are just some of the contributing factors.
When a few of these problems are occurring at the same time gold is usually the investment of choice to ensure your money continues to grow when most types of investment are declining. Gold has always been a safe haven especially during troubled times such as war, stock market crashes, fear of a new recession and the general decline in our economy. Gold has given us the inflation proof way to preserve our liquidity and safeguard our investments and future wealth.
Gold Prices In Recent History
Over the last 40 years the price of gold has risen by over 5,000% so if you had invested $10,000 in 1971 it would be worth over half a million dollars at today’s prices. Even in the last 10 years the price has gone from $271 per ounce to over $1,700, an increase of around 640%.
In 1944 the International Monetary Fund (IMF) was created as part of the Bretton Woods system and the US government pegged the price of gold at around $35 per ounce where it stayed for the next 25 years. In 1969 the system then started to crumble due to excessive printing of the US dollar and the negative US balance of trade. Several IMF member countries attempted to redeem their US dollar reserves for gold but the US government was unable to honor their obligations to any of the many countries who were part of the IMF agreement. This would instigate the end of “The Gold Standard“.
The Nixon Shock
Then in 1971 came the Nixon shock when the US president took a number of severe economic measures including the cancellation of the direct conversion of the US dollar to gold. The US left the gold standard and allowed gold to be freely traded on the stock exchange at the true market value. During the next 10 years gold would increase from $35 to $870 per ounce (up 2,485%) while the Dow Jones changed from 809 to 839 (an increase of just 3.7%) a long way behind inflation.
As a consequence of the “Nixon shock”, in 1973 President Gerald Ford made it legal for US citizens to own gold once again, ending the prohibition which had been in force since 1933. In the following years many other countries also allowed their citizens to own and trade in gold. Then in 1975 the New York Commodity Exchange commenced gold futures trading and the rest is history.