Apr 2012


Apr 2012

Gold Rate

By StoneX Bullion

Gold Rate in the 1970s

The main factors that contributed to the positive evolution during the 1970s are: a difficult economy for many countries characterized by high unemployment rates, high inflations, and low growth. Other reasons are the political ones like the war in Vietnam and the invasion of Afghanistan by the Soviet Union. We should also add to the list, which contributed to an increased gold rate, the oil embargo.

The gold rate was so high that at the beginning of the 1970s was estimated at US $35 per troy ounce and after ten years it reached the impressive level of US $870 per ounce.

The major factors that led to the end of the gold rate from the 1970s are: the ending of the gold standard, the oil embargo, the gold trade was at its beginning, and the economy in the West was stagnating.

Gold Rate in the 1980s and 1990s

In this period of twenty years, which is going to be presented in this second headline, the gold rate has experienced a path of decline, unlike the period presented above, the 1970s. Therefore, between 1980 and 2001 we are talking about a bear gold market.

We are talking of a down path for the gold rate so serious that if someone were to have bought gold at the beginning of the '80s at a rate of US $677 per troy ounce and decided to sell it in the '90s he would have obtained a rate of US $409 per troy ounce for its gold. Even though you do not believe it, this is not the worst situation. After 10 years, meaning in 2000, the gold rate was US $283 per ounce which is pretty low if we were to consider this level developed in a 20 years market.

Disregarding inflation, we are talking of a decrease of 60% in the gold rate. The reasons for explaining this negative evolution are: the transition economy from a manufacturing industry to a highly technologized one therefore a new economy, also these two decades came after the economic stagflation characteristic for the 1970s.

Gold Rate Presently

The present gold rate in on a path of steady rise, from US $265 per ounce the price increased to US $1,700 per ounce in 2011. This is mainly the reason for which the bull market of gold receives more and more gold buyers. We are talking about an increase with 640%. Therefore, if an investor were to buy gold in 2001 and kept it until 2011, that particular investor would have been approximately six times more profitable.

The main reason for such an increase in the gold rate is the devaluation of the US dollar and a reduction in the gold supply. Therefore, demand outgrows supply because central banks became buyers of gold again and people become more and more skeptical about a currency in which many preferred to make their investments.

The actual gold rate spikes the desire to invest in gold and the need to feel safety about our assets contributes to the increase of the present rate.