GOLD IN RECENT HISTORY – A CURRENCY FOR ALL TIMES
Gold prices in the U.S. remained constant up to and through the Great Depression averaging $20.64 from 1925-1930. Prices only dipped briefly in 1931 to $17.06
Gold ownership by private US citizens was no longer legal due to the confiscation act (Executive Order # 6102). The average price remained in a tight trading until range around $34.50 for the next 38 years.
President Roosevelt established the value of Dollar at $35 per troy oz (15.715 grains) Gold “.9999 fine” on January 1, 1934. This act devalued the dollar by roughly 41%, which previously had a price set at $20.67 against the same gold value. The US Treasury became sole owner of all the nations gold and increased its’ holdings by $US 2.81 Billion.
Bretton Woods agreement signed in July 1944 made the U.S. Dollar the world’s Reserve Currency and adopted the $US 35 per troy oz gold value.
IMF and World Bank were established and the US held to the $US 35 however this remained a difficult challenge for the US due to rising demand and an increasing deficit.
The London Gold Pool established between the US, and eight European nations to prevent the private market from exceeding the $US 35 per oz price set in 1934.
French President Charles de Gaulle insisting on redeeming US Trade dollars in gold instead of US Treasury debt paper (legally permitted under the Bretton Woods Agreement of 1944) foreshadowing closure of the London Gold Pool in April 1968.
President Richard Nixon faced with eliminating trade deficits or revaluating the dollar downwards against gold closed the “Gold Window” on August 15, 1971. Much like President Roosevelt’s’ refusal to accept the domestic obligation to redeem dollar for gold in 1933, President Nixon refused to accept the international obligation of the U.S. to redeem its Dollar in Gold as well.
World currencies “floated” against each other in a “basket” no longer backed by gold.
Gold went from $US 35 to $US 195 per troy oz.
It became legal for the first time in 42 years, for US citizens to own public gold on January 1, 1975.
Central Banks attempted to devalue the world price of gold by selling vast quantities of the precious metal at auction.
Dollar looses a full 25% of its weighted value against a basket of other world currencies as the demand for gold continued threatened Treasury/IMF supply ending to Gold auctions.
Determining the global financial to be on the verge of collapse, newly appointed Federal Reserve Chairman Paul Volker, switched policy from controlling interest rates to controlling money supply pushing Gold past $US 400 in October 1979 then to $US 850 on January 21, 1980.
U.S. Prime Lending Rate hit 20%, investors retreated back into dollars as gold retreated to $US 460.
The Dow broke 1100 points signaling a Bull Market for stocks and a long bear market for Gold.
Desert Storm, Collapse of the Soviet Union, selling of large quantities of Gold by Central banks, the Dot Com crash, and Economic Crisis in Asia keep gold prices relatively calm.
9/11 and the War on Terror see Gold once again beginning to rise as the US Dollar lossed strength against the newly introduced Euro encouraging Gold to climb to $416 per oz in Dec 2003.
Several natural disasters cause economic setback in the US, Oil supplies threatened, War overseas continues, and Gold climbs above $500 in December 2005.
As the national debt nears $US 10 trillion and dependency on foreign oil exceeds $US 3 trillion, Gold once again proves its’ inability to become worthless by surging past $US 749 in October 2007. Forecasters indicate this is only the beginning with prices potentially doubling over the next few years.
Gold prices soar over $1,000 per ounce in March ’08 while the Dow Jones industrial average plummets 42%. For the year, gold prices rise 8%. Gold again is the beacon of stability and prosperity in the financial meltdown during the fall.
Gold prices continue to surge based upon; the weakening U.S. dollar, surging commodity prices in face of a deepening recession, and a slumping jobs market and economic forecast. Countries like China, India and Russia emerge as “net buyers” of gold in unprecedented quantities to bolster their financial solvency and meet citizen demand. For the first time in recent history, the U.S. mints run short of gold and temporarily suspend the minting process. Saudia Arabia introduces Gold ATM machines to redeem paper currency for gold bars as gold begins to re-emerge as mainstream currency. Other countries follow suit.
Sustained economic chaos adversely affects weaker economies such as Greece, forcing European nations to prop up vital economies. In panic mode, European citizens buy up all existing British Sovereigns to protect themselves from potential economic disaster. Gold prices surge to record levels again above $1,400/ounce as worldwide demand reaches unprecedented levels and the World Bank calls for re-instatement of the “gold standard” for industrialized nations. For the first time in recent years, Silver begins to emerge as a viable alternative to paper currency devaluation and escalates in both international demand and price.
For the 11th consecutive year, Gold achieved stellar positive increases in value! Crushing traditional, paper-backed assets, Gold achieve a mid-year record high, above $1,900/ounce only to settle back down at year?s end. The banks and financial institutions have lined up to forecast huge value increases in 2012 and beyond, relative to the unprecedented global demand and continued weakness of the U.S. Dollar. Despite dire warnings including the downgrade of U.S. Treasury Certificates, the national debt soared past $15 Trillion with virtually no resolution in sight.