The desire for gold is the most universal and deeply rooted commercial instinct of the human race.
Famed Wall Street trader Gerald M. Loeb encapsulated humanity’s profound and enduring fascination with the precious metal. Over its long history with our species, the power of gold has moved mountains and created marvels. Through it all, the price of gold has fluctuated up and down, as we’ll see in this review of key gold price movements through history. Nothing has quite lasted through the entirety of human history like gold.
Before Gold Had a Standard Price
In the early days of human history, gold was a precious commodity for cultures around the world who prized it for its beauty, rarity, and its ability to be worked into jewelry, accessories, and art. From the early Romans to the Egyptians to the Chinese to the Indians, gold was a revered metal that was shaped by the finest smiths, often for the benefit of royalty and aristocracy.
During these early empires, gold was certainly valuable, and for some cultures it was used as a form of currency, but it didn’t have a universal price we can readily compare with today’s values. We do know that Egyptians considered a unit of gold – or a “shat” – to be 7.5 grams, and that it was considered to be a great deal of money at the time, but references as to what shats were used to purchase are rare to find. Shats fell out of favor with Ramses II some 3,000 years ago as the gold became consolidated with the pharaohs.
In 550 BC, King Croesus of Lydia once again minted gold coins, symbolically marking the return of gold as a regular currency.
And then, in 50 BC, the Romans officially got into the ring by adopting a standard value of gold. Emperor Augustus declared that one pound of gold was worth “40-42 coins” (which is difficult to compare to today’s values). However, one thing is clear: even the Ancients understood the intrinsic value of gold, and it was a key part of societies all around the globe.
Over the ensuing centuries, countries continued to set their own prices for gold. In 1257, for instance, Great Britain associated one ounce of gold with a value of 0.89 pounds.
Around this time, particularly the 1300s, our modern understanding of the historical value of gold begins getting clearer. According to an article in Forbes Magazine, the value of gold around then would have been the equivalent of $2,000 in 1999 dollars (which would be $3,700 today) per ounce. It dropped sharply due to the Black Plague, which effectively halved the number of gold owners.
The slump wouldn’t last long, though. Before Columbus discovered the New World, gold was at an all-time high of $4,628 in today’s dollars. The wealth of the Americas, however, caused the value to drop to $926 in the ensuing centuries.
By the 1800s, nearly every country in the world printed money that was backed by a value of gold. The gold standard had become the new norm.
Developing Gold Standards
With countries building reserves of gold to back their developing currencies, gold’s universal and evergreen value had become blindingly apparent. After all, a currency backed by a set amount of gold couldn’t fail, and state-level loaners would be comfortable knowing that there was precious metal backing up the words of their borrowers.
The price placed on gold fluctuated depending on the country and regional calamities. The United States, for its part, placed a value on gold of $20.69 an ounce in 1834, or the equivalent of around $740 in today’s money.
In Britain, gold was set at £4.25 (pounds sterling) an ounce ($1,170 today) under the recommendation of Sir Isaac Newton in 1717, and it held that value for 200 years – until the world adopted the U.S. dollar as its reserve currency.
Gold and the U.S. Dollar
The U.S. officially adopted the gold standard in 1900, declaring that its paper currency could be redeemed in gold for a value of $20.67 an ounce. By this point in time, the U.S. had stockpiled 602 tonnes of gold – a figure that doubled by 1913 and then almost doubled again by 1933. Between 1933 and 1941, the U.S. quadrupled its gold stockpile to its peak at 20,262 tonnes.
A large part of what made this possible was the Great Depression, which saw millions of Americans scrambling to cash out their back accounts into gold. It worked until 1933 when President Franklin Roosevelt made it illegal for U.S. residents to own gold – requiring all gold bullion and coins to be traded in for dollars. A year later, Roosevelt raised the value of gold to $35 an ounce.
By then, the U.S. had so thoroughly cornered the gold market that the 1944 Bretton Woods agreement formalized the U.S. dollar as the world standard, purely on the basis of the country’s suddenly behemothic gold reserve.
The global value of gold held at $35 ($267 today) around the world until 1971 when President Richard Nixon took the U.S. off the gold standard. By dissociating the value of the dollar from gold, the precious metal was suddenly unleashed – and by 1976, it had increased to $120 an ounce ($650 today).
The rampant inflation of the 1970s – caused in part by the dollar being the global reserve – drove more and more investors to gold over the next few years as they sought to protect their assets. By 1980, gold was valued at $600 an ounce (an inflation-adjusted $2,250 today).
Over the next decade and a half, gold held around $410 per ounce ($968 today) as a recession rocked the country. In 1996, the tides had turned and the U.S. economy was booming – and gold was down to $288 as a result ($566 today).
Gold as a Safe Haven in the 21st Century
While a strong dollar and a stable economy equates to a decrease in the level of investor interest toward gold, the opposite is also true. The 2001 terrorist attack in New York City and the ensuing recession drove investors to gold in hoards, boosting the value up to $409 an ounce ($668 today) in 2004.
The much larger and more impactful recession of 2008 led to a jump to $872 ($1,250) that year, and by 2011 the price of gold was up to $1,918 an ounce ($2,630).
By now it’s clear to see a trend: whenever the U.S. economy is stumbling, gold is going to go up. That continued to be true in 2020 with the outbreak of the Covid pandemic and the ensuing economic turmoil. That led to gold climbing to its highest price to that point in the modern era, reaching $2016.58 an ounce ($2,403).
In 2024, the average closing price of gold has been $2,029.06 an ounce. The U.S. economy has climbed back from Covid, but uncertainty looms in the air with the recent bout of inflation and talk of recession in the air. It’s widely recognized that Covid is prompting deglobalization, meaning economies around the world – the U.S. included – will be experiencing major adjustments in the coming years. There are also rising tensions among BRICS nations and the U.S., plus the Russian invasion of Ukraine and Israel’s war with Gaza continue to cause uncertainty on a global scale.
Regardless of what happens to the U.S. economy, gold’s role as a universal and evergreen asset continues to be valid. Investors looking to protect their assets against inflation aren’t taking chances with the dollar. They’re banking on gold – for reasons as old as time. Whether it’s the Egyptians, the Romans, the Americans or whoever comes after, gold always has an important role in the economies of human society.
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Don’t forget silver. In a related development, back in December 2022 sold my NC Mtn House bought in December 1988. Digging through piles of boxes, found one on the bottom…filled with 500+ rolls of pennies, nickels, dimes & quarters from my pre-1983 days running a c-store on the sideline during my GM days of an Esso Jobber. Around 10% silver of the 10/25¢. All 1¢ were pre-83, so are “worth” around 4¢ each.
Might come in handy soon.
I would like to hear much more about the metals market price discovery manipulation that has been ongoing for 40 years.
Politicians/metals traders/ government=crooks. FIFY
Roosevelt did not ban Americans from owning gold in 1933. You were allowed to keep certain amounts of many items. Of course the aristocrats put theirs on ships and had it sent to various banks in Europe for safekeeping. Americans turned in most gold at the time as they trusted their “leaders”. SUCKERS!!!!! If you still trust politicians today I wish you the best of luck. SUCKERS!
Sounds to me like the Egyptians don’t know the difference between shat and Shinola!