The Price Of Gold Over The Last 100 Years
There is no doubt that gold is considered to be one of the safest and least volatile investments. It has for generations acted as a safety net even when other markets have been volatile or even when they have been declining. There is a common belief, perception, and perhaps even reality that the price of gold is not directly related to the growth of other assets and commodities. However, at the same time, there have been instances where there have been violent upturns and downturns in the price of this yellow precious metal. Hence, at times there have been many people who have lost money in gold investment. This happens especially when the markets are moving northwards at a brisk pace. The pace at which we may expect it to grow may not happen. When this happens investors often end up losing money. However, in a normal situation, when there is a need for a safe, long-term investing avenue, there is hardly any doubt that gold has been considered one of the safest bets.
GOLD DOES NOT GENERATE INCOME
Many people make the mistake of considering gold as an income-generating asset. This is not the case and comparing it with bonds and stocks will not be the right thing to do. The return on gold is based totally on price appreciation. Further, investing in gold comes with some unique costs. Because it is a physical asset, it requires insurance storage costs. Hence, many smart investors believe that gold could be one of the most important investments when one has a bouquet of investments to choose from. It cannot be considered as a single source of income. Further, if you wish to invest in gold it would not be a bad idea to have a look at THE PRICE OF GOLD OVER THE LAST 100 YEARS. This will perhaps give you a reasonably good idea about the movement of gold prices over the century. Though it might look too long a period of comparison, it will help you to understand the various reasons and situations that may have helped in pushing gold to the current levels they are today. Yes, it is a question of demand and supply, and looking at gold from a historical perspective will certainly help in more ways than one.
HISTORICAL PERSPECTIVE
To have a reasonably accurate historical perspective of the price of gold in the USA let us start looking at the price of this metal from 1934. This was the year when the Gold Reserve Act was introduced. Prior to the introduction of the Gold Reserve Act, there was a rule that made it mandatory for the citizens of the country to surrender their holding of gold, gold coins, and notes and have them exchanged into US Dollars. This made an investment in gold extremely difficult and many people even found it futile and impossible. However, a few people may have taken the risk of hoarding or concealed some portion of the precious metal. However, most of them ended up losing the gold holding. This could be one of the reasons why the price of gold started moving up during the tenure of President Roosevelt
THE PERIOD OF RICHARD NIXON
Richard Nixon’s tenure as the President of the USA will be remembered because he was the one who closed the gold purchase window. During this period, the price of gold was artificially set at around $35 per ounce. Since then the price of gold has moved on and as of April 2020, the price of gold per ounce is around $1,650. This in real terms would mean an appreciation of roughly around 4,500 percent. When we discount inflation, then according to experts the price of gold has moved up by around 3,221 percent. This indeed looks quite impressive. During the month of July 2020, the price of gold touched the figure of $2,000 an ounce.
In fact, this price was the highest not over the past 41 years from 1971. But it was the highest in the past nine years. This is because the price of gold touched a whopping $2,000 per ounce in 2011 and this could be mostly attributed to the great financial meltdown that started happening in 2008. People literally lost faith in stocks and shares. Prices of commodities like crude oil also took a beating because of the economic collapse. All these left investors with very little option and therefore many of them turned to gold because they felt it was the safest investment at that point in time.
WHAT DOES THIS SAY?
There are a few takeaways if we monitor the price of gold over the past 80 to 100 years. Gold is another form of investment and therefore if you really want to make some decent money out of it, you must consider the time frame of investing. You also must be able to study and research the market. This will help you to have a better understanding of how the markets are expected to move during that time period.
While gold is a relatively safe investment, it would be wrong to consider it a foolproof investment. Like bonds, stocks, and commodities, the gold price also keeps moving up and down and there could be a number of factors and reasons for this. Any major happening in the gold economy could influence the price of gold. Therefore, if you wish to have a safe and relatively growing investment portfolio, as mentioned above, you must understand the importance and significance of diversification. This is because of a number of reasons. Gold certainly could be a critical and vital addition to your diversified portfolio, and it could come in handy when the economy or world economy is on a downslide. It has been found that the price of this yellow metal moves up whenever there is a slip in the overall economic conditions of many nations that impact and control the world economy.
THE FINAL WORD
Yes, there is no doubt that the price of gold has grown by more than 3,300% since 1971 and it could be much more when we look at the price of gold as it existed around 100 years back say in the year 1921. But it would be wrong to conclude that such fabulous growth percentages indicate that gold could be one of the safest investments. There are other investments too that are equally good if not better. More importantly, gold cannot be considered as an income-generating avenue. It at best can only be a good investment avenue.