This post is by Nicholas LePan from Visual Capitalist
Golden Bulls: Visualizing the Price of Gold from 1792 – 2020
Some people view gold as useless metal in the digital age. It does not produce income, it sits in vaults and has limited industrial applications. But nonetheless it consistently goes up in price.
Gold will always be gold, and it has steadily provided security and value as financial markets go up, down or disappear.
Today’s infographic comes to us from Sprott Physical Bullion Trust and outlines how gold while always valuable, goes through periods of extreme bull markets, one of which we are in now.
Gold as Money: Gold-backed Currency in the United States
During the early days of the American Republic, the United States used the British gold standard to set the price of its currency. In 1791, it set the price of gold at $19.49 per ounce but also allowed silver redemption in silver. In 1834, it raised the price of gold to $20.69 per ounce.
The price of gold remained relatively stable through depressions, civil wars and the first world war. It would not be until the beginning of the great depression when gold really started to shine.
The 1929 stock market crash marked the beginning of the end for gold as money in the United States. In the wake of the financial collapse, investors started redeeming paper currency for its value in gold, removing currency from the economy.
In 1933, President Franklin D. Roosevelt limited the private ownership of gold to discourage hoarding. In 1934, Congress passed the Gold Reserve Act which prohibited the private ownership of gold and raised the price of gold to $35 per ounce.
In 1944, the victorious allied powers negotiated the Bretton Woods Agreement, making the U.S. dollar the official global currency. The United States ensured the price of gold at $35 per ounce until the onset of a stagnant economy in the early seventies.
End of the Gold Standard and A New Economic Order
In 1971, President Nixon mandated the Federal Reserve to stop honoring the U.S. dollar’s value in gold. This meant foreign central banks no longer could exchange their american dollars for gold, functionally taking the dollar off the gold standard.
By 1980, the price of gold had surged to $594.92 amidst an environment of rising inflation in the American economy. The Fed ended inflation with double-digit interest rates which in turn slowed the economy, causing a recession.
The price of gold dropped to $410 per ounce and remained around this price until 1996 when it dropped to $288 per ounce in response to steady economic growth. The shine returned to gold after a series of economic crises, such as the tech boom bubble, 9/11 terrorist attacks and a recession in 2011.
Radical Monetary Policies: Bubble Economies and Paper Mach Policies
In 2008, the Global financial Crisis shook the world which saw the dramatic collapse of asset values around the world, resulting in economic retraction. Policy makers and central bankers embarked on a controversial policy of quantitative easing to support financial markets. Gold rose to $869 per ounce during the 2008 financial crisis and would continue so.
The price of one ounce of gold hit an all-time record of $1,895 on Sept. 5, 2011, in response to worries that the United States would default on its debt. During this period, Gold investors saw returns of 611% over 144 months.
As the economy regained its legs, the price of gold waned during a period of economic prosperity that glossed over the effects of money printing.
Gold reached a peak of $1891 in September 2011, and retraced to a low of $1050 by December 2015. It was not until the beginning of a new American presidency that gold rose again.
Gold and the New Financial Landscape
In the 54 months since December 2015 to today, the price of gold increased 62% and reached a high of $1751 on May 15, 2020. A debt-fueled economic recovery growing old, a trade war with China and the recent COVID crisis has once again provoked economic uncertainty and a renewed interest in gold.
With interest rates already at historic lows and quantitative easing as standard operating procedure, global economies are entering unprecedented territory for the economy and the price of gold amidst the backdrop of a pandemic and record government spending.
Gold in Perspective
In an era to tech startups, ETFs and financial wizardry, many people consider gold as just a shiny paper weight but its performance compared to other assets shows it is far from this.
In 1792, an ounce of gold was worth about $19.49 and as of May 15, 2020, $1751. While no has lived this long, gold has proven its value over time as companies, countries and governments come and go.
Now more than ever in an era of central bank quantitative easing and ending bailouts, Gold will continue to preserve its value and offer its owners value and security against financial markets and currencies.
Golden Bulls are no idle idol worshipers in this era of radical monetary policy.
The post Golden Bulls: Visualizing the Price of Gold from 1792-2020 appeared first on Visual Capitalist.