Whether someone is well-to-do or making ends meet hardly, the thought of investment strikes at least once in life. When thinking of investments, gold is the first choice. People have been investing in gold for ages, and it always has driven results. If nothing more, then a feeling of security surely houses our minds. But before investing in gold, it is important to know about its history. Here, we will discuss highs and lows in gold price history as the fluctuations in its rate are forever.
Gold price history is long. Considering the gold chart from 1970 to 2020, it is evident how rapid fluctuations occurred in the late 90s. These major ups and downs give us future insights. Hence, it becomes crucial to explore what the past has to offer in the present. We’ll be discussing why these fluctuations happened and how they affect future investors.
Going 50 Years Back- High And Lows In Gold Price History
Going 50 years back, digging into history holds enormous scope for present and future investors’ decision-making. Analyzing the trends that the gold market followed helps anticipate major changes earlier to save money from jeopardizing, but altogether, it doesn’t contribute to what the future will hold for investors. This ‘change metric’ is attributed to multiple factors like geopolitical instability, inflation, mining and refining costs, etc.
When you look at the gold chart, you observe a major peak in 1980 after continuous lows from 1970 to 1980. According to the chart, gold breaks the highest price record concerning inflation back then. In the mid-1970s, gold price was under $200, and a dramatic fluctuation happened in 1980, making the price of one ounce reach above $600. What were the reasons for this dramatic change and ephemeral existence?
Afghanistan’s invasion by Russia and the Iran hostage crises in December 1979 were major reasons behind this. During this time, the Federal Reserve also increased its rates by 13% to 20%. The demand for gold rose unexpectedly.
According to an old report, the demand for gold in 1979 rose by 14,15 million ounces. Inflation was high in the US during the time. So, this sudden rise in gold prices was a blend of a couple of events; however, the prices fell as dramatically as they rose. Only in the first three months of 1980 did the price above $600 fall to below $400.
Since 2000, the price of gold has not come down. The two decades in a row mark the ever-growing price of metal, with the highest in 2023. The price of one ounce of gold in 2023 was $2135, the highest to date, but not beating the 1980s when seen from the era’s economic perspective.
Reasons Behind Gold Price Fluctuations In The Present
Several reasons give back to fluctuations in the price of gold. Some of them are discussed below-
Gold prices have a deep relation with inflation. Investors use gold as a defensive tool against inflation. Why? Because gold is in high demand during inflation. Investors seek a safe-haven asset then. Ultimately, if inflation rises, the rates of gold rises. The historical data is evidence of the relationship between inflation and gold prices.
Demand And Supply
Gold is a cherished investment that retains its value over time. It will fluctuate, but we know, eventually, it is gonna increase and remain so. So the first high demand comes from investors, and the second demand is for jewelry making and devices.
Gold is a highly loved jewelry material. Its demand increases during the wedding season and sometimes during the tourist season. When the demand increases, the need for supply increases. The more supply will be charged, the more gold prices will rise. Simple!
Gold is a dollar-dominated metal. It means when the value of the dollar is high, the price of gold will be lower, and when the dollar is weak, gold prices are high. We can understand it as the price of gold is inversely proportional to the value of the dollar. But, there have been times when this equation doesn’t stand, and USD and gold prices grow together.
When the USD weakens, the value of other currencies increases. During this time, other countries increase their exports, which leads to an increase in the value of their currency and vice versa.
Changes in government monetary policy highly impact the price of gold in the US. Because gold is a safe haven, even central banks and institutions secure this metal, and when any changes are made in the Fed policies, the price of gold is affected. For example, if the Fed increases its rates, the price of gold will go up and vice versa. When the Fed increased its rates more than 10 times in 2022, it led to an increased price of gold.
Geopolitical issues affect the fluctuations in gold prices. Political tension between two nations can lead to restrictions on supplies, imports, or exports, which ultimately depreciate the value of their currencies. Herein, the risk of loss is predicted by investors, so they take refuge in gold assets. The prices also fluctuate with the intensity of political conflicts. It has been observed that gold prices do well during these crises.
Benefits Of Investing In Gold
Gold has always been the first choice of investors because there are valid benefits behind that. Some of these are-
- Safety in times of inflation
- Saving for future
- Evergrowing prices
- Ease of selling and buying
- Can be kept for a longer time
- Serves as a generational asset
- Eases taking a loan
With this, we have come to the end of this write-up. We hope you may have got useful insights into the history of gold prices, investment in it, and its benefits as well. Gold investment is always the best choice. Not just big-time investors but common people look up to little investments that they can afford because the future of gold investment is as bright as the metal itself is.
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