Record Gold Price and All Time Highs
- Gold Price Influencers...
- Record Prices- LBMA Gold Fix Table
- 2010 - 2020 Review
- 2000-2010 Review
- 1990-2000 Review
- 1980 - 1990 Review
- 1970 - 1980 Review
- Why Do We Get Gold Price Peaks?
- Counterparty Risk
- The Gold Standard
- Bretton Woods - The Gold / Dollar Standard
- The Dollar Standard
- Euros SDRs or What?
- Gold Silver & Precious Metals
- Gold Bulls?
Highest Ever Gold Prices in US Dollars, Sterling and Euros
|Currency||Gold Price Per Ounce - LBMA Fix||Intraday High||Date|
|US Dollars||US$1,896.5||US$1,917||5th September 2011|
|Pounds Sterling||£1,278.06||£1,282.19||3rd September 2019|
|Euros||€1,403.86||€1,413.30||4th September 2019|
We have gold price records in descending date order below. If your interested in why price peaks occur you can click here to read on below the prices.
Gold Price Influencers...
Gold price has fluctuated, sometimes wildly, in response to geo-politico-economic events beginning when the US ditched the gold standard in 1971. Since then gold has become an ever-increasing safe haven option for investors looking to hedge against inflation. Onwards from January 2000 when the UK government abolished VAT on the yellow metal demand soared and prices accordingly. The financial crash of 2008 added further to demand and over the next 4 years prices hit all time high. Proliferation of the internet has made it easier than ever for retail investors to deal with online bullion dealers like ourselves which only compounds the existing demand from institutional investors and central banks. If you’re looking for reasons as to why prices are peaking at a certain time you can read more below the prices. Click here to skip to the explanations.
Record Prices- LBMA Gold Fix Table
Gold first found itself on a bull run in 1980 with prices topping out in dollars at $850 per ounce. Since then the market went through a correction until ballooning once again during and after the financial crash of 2008. The Pound and Euro reach price peaks at different times due to the exchange rate against dollars. Intraday highs are likely higher than these values as we only list the fix on morning and afternoon.
|Date||Fix||Price £||Price $||Price €|
|4th September 2019||P.M||£1,269.97||$1,546.10||€1,403.86|
|3rd September 2019||P.M||£1277.80||$1,537.85||€1,403.44|
|3rd September 2019||A.M.||£1,278.06||$1,532.45||€1,400.35|
|29th August 2019||P.M||£1,262.96||$1,536.65||€1,392.03|
|28th August 2019||A.M||£1,263.31||$1,541.75||€1,389.89|
|13th August 2019||A.M.||£1,265.90||$1,527.20||€1,363.48|
|12th August 2019||A.M.||£1,244.820||$1,501.95||€1,343.64|
|9th August 2019||A.M.||£1,242.190||$1,503.50||€1,342.02|
|7th August 2019||P.M.||£1,239.330||$1,506.05||€1,341.44|
|7th August 2019||A.M.||£1,225.820||$1,487.65||€1,330.11|
|5th August 2019||P.M.||£1,203.850||$1,465.25||€1,310.23|
|5th August 2019||A.M.||£1,199.920||$1,457.45||€1,307.92|
|2nd August 2019||P.M.||£1,187.280||$1,441.75||€1,298.44|
|2nd August 2019||A.M.||£1,184.170||$1,436.05||€1,294.02|
|1st October 2012||P.M||£1,104.196||$1,787.00||€1,382.27|
|5th September 2011||P.M.||£1,178.92||$1,895.00||€1,345.50|
|5th September 2011||A.M.||£1,174.67||$1,896.50||€1,341.14|
|23rd August 2011||A.M.||£1,138.64||$1,886.50||€1,301.75|
|22nd August 2011||A.M.||£1,139.55||$1,877.75||€1,303.18|
|19th August 2011||A.M.||£1,126.91||$1,862.00||€1,299.28|
|18th August 2011||P.M.||£1,109.76||$1,824.00||€1,276.15|
|18th August 2011||A.M.||£1,087.12||$1,794.50||€1,246.44|
|17th August 2011||A.M.||£1,089.96||$1,792.00||€1,240.40|
|11th August 2011||A.M.||£1,105.75||$1,786.00||€1,254.39|
|10th August 2011||P.M.||£1,094.71||$1,772.00||€1,246.92|
|9th August 2011||A.M.||£1,080.98||$1,770.00||€1,241.76|
|8th August 2011||A.M.||£1,040.94||$1,709.75||€1,195.21|
|4th August 2011||P.M.||£1,028.28||$1,679.50||€1,186.17|
|3rd August 2011||P.M.||£1,019.02||$1,669.25||€1,166.57|
|3rd August 2011||A.M.||£1,016.77||$1,667.50||€1,163.40|
|2nd August 2011||P.M.||£1,005.80||$1,637.75||€1,147.37|
|29th July 2011||P.M.||£992.08||$1,628.50||€1,133.11|
|27th July 2011||P.M.||£991.76||$1,625.00||€1,124.88|
|27th July 2011||A.M.||£987.69||$1,621.00||€1,118.32|
|25th July 2011||A.M.||£995.02||$1,618.50||€1,126.62|
|19th July 2011||A.M.||£994.11||$1,602.00||€1,129.04|
|18th July 2011||P.M.||£994.28||$1,599.00||€1,136.70|
|18th July 2011||A.M.||£992.83||$1,598.25||€1,136.33|
|14th July 2011||A.M.||£987.54||$1,592.50||€1,119.04|
|13th July 2011||P.M.||£988.36||$1,579.00||€1,121.05|
|13th July 2011||A.M.||£984.71||$1,571.50||€1,114.62|
|12th July 2011||P.M.||£977.00||$1,555.50||€1,107.34|
|11th July 2011||P.M.||£976.71||$1,555.50||€1,106.88|
|22nd June 2011||P.M.||£962.73||$1,552.50||€1,077.38|
|3rd May 2011||A.M.||£938.13||$1,546.50||€1,045.22|
|28th April 2011||P.M.||£919.74||$1,535.50||€1,034.60|
|21st April 2011||A.M.||£909.97||$1,507.00||€1,028.95|
|20th April 2011||A.M.||£920.15||$1,505.00||€1,037.93|
|19th April 2011||A.M.||£917.97||$1,495.00||€1,047.58|
|18th April 2011||P.M.||£917.08||$1,493.00||€1,046.25|
|18th April 2011||A.M.||£913.09||$1,484.50||€1,036.81|
|15th April 2011||P.M.||£903.76||$1,476.75||€1,023.81|
|15th April 2011||A.M.||£901.49||$1,472.50||€1,018.61|
|8th April 2011||A.M.||£897.80||$1,470.50||€1,022.97|
|6th April 2011||P.M.||£896.90||$1,461.50||€1,022.10|
|6th April 2011||A.M.||£894.25||$1,457.00||€1,019.02|
|24th March 2011||A.M.||£892.38||$1,447.00||€1,018.44|
|24th March 2011||A.M.||£891.15||$1,441.25||€1,019.70|
|23rd March 2011||P.M.||£885.25||$1,439.50||€1,017.82|
|7th March 2011||P.M.||£884.51||$1,437.50||€1,026.27|
|7th March 2011||A.M.||£880.52||$1,437.00||€1,025.26|
|2nd March 2011||P.M.||£879.00||$1,435.50||€1,034.82|
|7th Dec 2010||A.M.||£902.13||$1,426.00||€1,065.85|
|9th Nov 2010||P.M.||£879.39||$1,421.00||€1,018.78|
|9th Nov 2010||A.M.||£877.32||$1,416.25||€1,016.91|
|5th Nov 2010||P.M.||£859.03||$1,395.50||€990.28|
|5th Nov 2010||A.M.||£855.37||$1,384.25||€978.06|
|4th Nov 2010||P.M.||£848.12||$1,381.00||€968.44|
|14th Oct 2010||A.M.||£860.75||$1,380.75||€980.16|
|13th Oct 2010||P.M.||£862.44||$1,365.50||€979.42|
|7th Oct 2010||A.M.||£853.10||$1,359.50||€973.02|
|6th Oct 2010||A.M.||£847.44||$1,347.00||€972.28|
|5th Oct 2010||P.M.||£838.06||$1,330.50||€964.83|
|5th Oct 2010||A.M.||£835.49||$1,325.75||€962.15|
|1st Oct 2010||P.M.||£832.86||$1,316.25||€957.41|
|1st Oct 2010||A.M.||£828.29||$1,313.00||€955.19|
|30th Sep 2010||A.M.||£824.32||$1,311.00||€960.09|
|29th Sep 2010||P.M.||£827.22||$1,307.50||€961.26|
|29th Sep 2010||A.M.||£826.12||$1,307.50||€962.39|
|24th Sep 2010||A.M.||£826.49||$1,298.00||€967.36|
|22nd Sep 2010||P.M.||£825.46||$1,293.50||€963.50|
|22nd Sep 2010||A.M.||£823.56||$1,291.75||€966.16|
|17th Sep 2010||A.M.||£816.19||$1,281.50||€975.49|
|16th Sep 2010||P.M.||£815.03||$1,272.50||€971.97|
|16th Sep 2010||A.M.||£815.37||$1,271.25||€971.98|
|15th Sep 2010||A.M.||£818.82||$1,270.40||€978.89|
|14th Sep 2010||P.M.||£818.88||$1,265.50||€982.76|
|8th Sep 2010||A.M.||£814.29||$1,256.75||€991.73|
|7th Sep 2010||P.M.||£820.33||$1,256.75||€985.69|
|18th Jun 2010||P.M.||£848.42||$1,256.00||€1,015.61|
|8th Jun 2010||A.M.||£867.45||$1,248.00||€1,048.03|
|12th May 2010||A.M.||£831.83||$1,241.25||€977.90|
|11th May 2010||P.M.||£824.07||$1,222.50||€960.41|
|3rd December 2009||A.M.||£731.59||$1,218.25||€805.46|
|2nd December 2009||P.M.||£727.92||$1,212.50||€804.31|
|2nd December 2009||A.M.||£727.10||$1,211.50||€802.11|
|24th November 2009||A.M.||£708.81||$1,170.25||€782.93|
|23th November 2009||P.M.||£702.87||$1,169.50||€780.08|
|23th November 2009||A.M.||£702.41||$1,166.00||€778.53|
|18th November 2009||P.M.||£684.83||$1,149.00||€768.61|
|18th November 2009||A.M.||£681.62||$1,146.00||€767.07|
|17th November 2009||P.M.||£675.33||$1,134.75||€763.58|
|17th November 2009||A.M.||£673.10||$1,131.75||€759.26|
|16th November 2009||P.M.||£674.79||$1,130.00||€754.59|
|16th November 2009||A.M.||£676.83||$1,128.75||€754.41|
|12th November 2009||A.M.||£672.90||$1,116.00||€746.19|
|11th November 2009||P.M.||£669.82||$1,114.75||€742.26|
|11th November 2009||A.M.||£667.52||$1,114.75||€741.93|
|9th November 2009||A.M.||£658.80||$1,108.50||€738.90|
|6th November 2009||P.M.||£661.29||$1,096.75||€735.68|
|6th November 2009||A.M.||£659.60||$1,095.00||€735.05|
|4th November 2009||A.M.||£659.99||$1,091.75||€739.57|
|14th October 2009||A.M.||£666.46||$1,066.00||€715.15|
|13th October 2009||A.M.||£675.74||$1,064.50||€719.50|
|12th October 2009||P.M.||£669.16||$1,058.75||€715.71|
|8th October 2009||A.M.||£657.08||$1,054.75||€713.97|
|7th October 2009||A.M.||£658.95||$1,047.00||€709.10|
|6th October 2009||P.M.||£652.24||$1,038.75||€704.95|
|17th March 2008||A.M.||£508.51||$1,023.50||€649.51|
|14th March 2008||P.M.||£493.05||$1,003.50||€642.32|
|14th March 2008||A.M.||£491.62||$997.00||€641.16|
|13th March 2008||P.M.||£488.99||$995.00||€638.97|
|3rd March 2008||P.M.||£496.68||$988.50||€647.86|
|3rd March 2008||A.M.||£492.70||$978.25||€644.94|
|29th February 2008||P.M.||£488.85||$971.50||€640.07|
|29th February 2008||A.M.||£488.88||$969.00||€637.58|
|28th February 2008||P.M.||£483.00||$959.75||€634.08|
|27th February 2008||P.M.||£482.09||$959.50||€635.98|
|27th February 2008||A.M.||£481.62||$958.75||€636.32|
|25th February 2008||A.M.||£482.26||$947.50||€639.77|
|22nd February 2008||A.M.||£480.88||$945.75||€637.51|
|21st February 2008||P.M.||£482.76||$945.00||€641.20|
|21st February 2008||A.M.||£482.03||$943.00||€639.76|
|1st February 2008||A.M.||£468.75||$933.00||€627.06|
|29th January 2008||A.M.||£466.55||$927.50||€627.75|
|28th January 2008||P.M.||£464.22||$921.75||€623.99|
|25th January 2008||A.M.||£465.28||$921.25||€625.64|
|15th January 2008||P.M.||£463.36||$913.00||€612.83|
|14th January 2008||A.M.||£464.32||$911.50||€612.16|
|11th January 2008||A.M.||£457.56||$893.75||€604.74|
|9th January 2008||A.M.||£452.15||$887.85||€603.53|
|8th January 2008||P.M.||£442.03||$873.50||€593.29|
|8th January 2008||A.M.||£441.57||$873.25||€593.81|
|3rd January 2008||P.M..||£438.49||$865.35||€587.28|
|3rd January 2008||A.M.||£438.49||$865.35||€587.28|
|2nd January 2008||P.M.||£427.82||$846.75||€576.45|
|7th November 2007||A.M.||£400.47||$841.75||€573.56|
|6th November 2007||P.M.||£393.77||$822.50||€564.71|
|6th November 2007||A.M.||£392.13||$817.56||€562.97|
|5th November 2007||P.M.||£386.71||$804.75||€555.73|
|5th November 2007||A.M.||£385.59||$802.50||€554.94|
|29th October 2007||A.M.||£385.12||$792.50||€549.85|
|26th October 2007||P.M.||£380.17||$779.15||€542.40|
|26th October 2007||A.M.||£377.38||$775.60||€539.89|
|19th October 2007||A.M.||£375.47||$768.25||€537.95|
|18th October 2007||P.M.||£373.16||$764.15||€534.60|
|17th October 2007||P.M.||£373.98||$762.52||€536.44|
|16th October 2007||A.M.||£374.58||$761.75||€537.39|
|15th October 2007||P.M.||£371.71||$758.85||€537.39|
|15th October 2007||A.M.||£371.10||$755.85||€531.17|
|12th October 2007||P.M.||£368.63||$749.50||€528.56|
|11th October 2007||P.M.||£367.70||$749.00||€527.35|
|11th October 2007||A.M.||£366.21||$747.50||€525.93|
|1st October 2007||A.M.||£364.78||$745.25||€523.53|
|28th September 2007||P.M.||£365.40||$743.00||€522.98|
|28th September 2007||A.M.||£363.71||$737.75||€520.31|
|21th September 2007||P.M.||£365.12||$737.00||€523.18|
|21th September 2007||A.M.||£365.01||$735.35||€522.60|
|20th September 2007||P.M.||£365.28||$734.50||€522.33|
|20th September 2007||A.M.||£362.57||$727.50||€518.45|
|12th May 2006||A.M.||£382.74||$725.75||€561.38|
|10th May 2006||A.M.||£378.25||$704.30||€551.05|
|1st January 1980||P.M||£371.07||$850.00||N/A|
2010 - 2020 Review
Gold price reached a peak of £1178 per ounce in September 2011 marking a new all-time high for the price of gold in sterling. In US dollars the price topped out at an impressive US$1917 per ounce though the offical fix on the day was slightly lower than this intraday high..
The 28-year record high gold price, in US Dollars, previously $850.00 on the p.m. fix on 21st January 1980, was smashed several times in January and February 2009, climibing to $1,146 on 18th November 2009, on to over $1,300 in September, October 2010.
Gold hit all-time record high on election day May 6th, 2010, with 2 record fixes, then broke through £800 per ounce on sterling weakness in late trading, running up to touch £818 per ounce.
On election results day, May 7th 2010, gold fixed at another all-time record high of £825.602 per ounce, largely on sterling weakness overnight because of the impending hung parliament.
Gold itself has been in strong demand on fears over Greece, and possible contagion affecting Ireland, Spain, Portugal and Italy.
The Greek economic & political crisis has hammered the euro, seeing euro gold price rise another 15% to break €962 on May 6th, 2010.
On Friday 12th May 2006, gold reached its record highest price ever in euros, the afternoon London Gold Fix was €561.378, although in US dollars it was still only $725.00.
Gold has only been fixed in Euros since 1st January 2000, before that date it is shown in two currencies only, the pound sterling and the US dollar.
The record high gold price in Euros has been broken many times. Notable high points include May 12th, 2006 when the p.m. gold fix was €561.378, and January 3rd, 2008 at €587.275. It has continued to break records, the most recent being 11th February 2010 at €635.908.
The 28-year record high gold price, in US Dollars, previously $850.00 on the p.m. fix on 21st January 1980, was smashed several times in January and February 2009, hit $1218.25 December 3rd, 2009.
Now $1,134.75 on 17th November 2009.
On the afternoon London Fix of 6th October 2009, gold fixed at $1,038.75 per troy ounce. This was the highest ever dollar fix, until...the next day, on the morning London Fix of 7th October 2009, fixed further up at another new all-time high of $1,047 per ounce.
On 13th March 2008, it broke through the $1,000 per ounce barrier for the first time ever. Although it retreated to about $995, we think it may fix at over $1,000 tomorrow or soon.
It bottomed out in 1999 and has been on an uptrend ever since. In May 2006, and October 2007, it hit new all-time peaks in pounds sterling.
Shortly after we finished updating this page on our old website on 20th February 2008, gold shot up yet again in late trading, by about $20 per ounce, and hitting new record highs in all three gold fixing currencies.
On 21st February 2008, gold broke all three currency price records yet again, at £482.759; $945.00; and €641.200 per ounce on the afternoon London Fix. Intraday trading was even higher at over $950, breaking another magic psychological barrier. Next stop $1,000?
The first trading day of 2008 started with not one, but two all-time record high gold prices in sterling. If our gut-feeling is correct, these will be the first of many.
After a 32% gain during 2007, gold started the new year strongly with a jump of over £10 per ounce, from a fix of £417.624 to $427.824 on Wednesday afternoon's fix.
As we were writing this, late Wednesday afternoon UK standard time, gold continued to surge, hitting around £434 per ounce, over $857 in US dollars, and over €580 in euros. It looks set to fix tomorrow at a new all-time dollar, sterling and euro high.
2008 Predictions - We don't pretend to be analysts, but we do read much about gold and currencies. One of the best books we read recently was Wake Up, and the scenarios predicted therein are still rolling our day be day to universal surprise. Neither are we "gold bugs", as we try to gauge realistic future gold prices, but we feel that a 15% increase during 2008 is a distinct possibility if not probability. This would put gold at around £482 per ounce, or about $960 US by the end of 2008. A normal range of market fluctuations during the year could easily see £500 or $1,000 per ounce gold.
With one trading day to go in 2007, there could yet be another all-time sterling high for gold, which will again go unreported. We might still see a new all-time dollar high this year, as gold bullion is only 2% below its 1980 dollar peak.
Trading volumes around Christmas and New Year are usually light, so anything could happen on Monday, New Year's Eve.
By the 28th December 2007, with one final trading day left this year, gold reached its 14th record all-time high, and as we wrote this, was trading at over £419 per ounce, so it looks at though it might hit yet another record on new year's eve.
The London a.m. fix on 29th October 2007 was £385.12 in pounds sterling, a new all time record high. This fixing price in US dollars was $792.50 and in euros €549.851.
As at October 2007, it has hit 27-year highs 24 times, in US dollars. It looks set to reach and break through the previous £850 high point sooner if not later.
Some pundits, including "The Bullion Desk" in London had been forecasting $850 in 2007, possibly by November, since early in the year or late 2006.
2007 Gold Prices in Sterling - Gold started 2007 at £314.710, and hit record high sterling prices 13 times, reaching £418.486 on 28th December, beating the previous peak of £371.066 on 21st January 1980.
33% Annual Gains - The increase in the gold bullion price was 32.9751% during the year, not bad for a safe "defensive" investment!
Media Myopia - Yet again, we have seen no mention of the record prices in the UK media, which seems to be quite myopic, and only looks at the US dollar price of gold. When this hits $850, we predict there will be universal proclamation of it. This magic figure might be broken before the end of 2007. Forecasts of gold prices for 2008 are bound to include $900, $950, and $1,000 or more.
Media Bias - The Times of India unfailingly reports gold price movements in Indian Rupees, even the Chinese press reports gold price news in Renminbi, but the British press only wag their tails at gold prices in US dollars.
Sick Sterling - One thing that these recent sterling gold highs does underline is the weakness of the pound sterling, which has fallen over 5% against the euro in the last few weeks. and 4% against the US dollar. Since 1980, sterling has dropped by almost 10% against the greenback. The exchange rate at the 21st January 1980 afternoon fix was $2.207104; at today's (28th December 2007) afternoon fix, it was $1.993325.
This morning (12th May 2006), gold fixed at $725.75, a 25 year record, but still 15% below the highest recorded dollar price. Many now believe that it is only a matter of time before gold hits its all time high in US dollars also, perhaps on its way to $1,000+. Who knows? We certainly would not want to bet against it!
On Wednesday 10th May 2006, gold reached its record highest price ever in pounds sterling, the morning London Gold Fix was £378.249, beating the previous peak of £371.066 on 21st January 1980, although in US dollars it is still 15% below its $850 peak.
As at Friday 12th May, gold had retained this strong price, trading between about £380 and £387 per troy ounce, the highest fix being £382.739 on the Friday morning fix of 12th May.
Record High Gold Price in US Dollars - The previous all-time record high gold price in US dollars was reached on 21st January 1980, fixing at $850.00 on that day's p.m. fix.
Record High in Beijing - The record price in Chinese Yuan was achieved on Tuesday 4th April 2006, according to the Beijing Daily newspaper, hitting 170 yuan per gram (21.25 dollars). "Gold has never been sold at such a high price in Beijing," said Wang Jian, general manager of the Gongmei Mansion Gold Store, told the paper. "I doubt whether consumers will hesitate to buy gold ornaments now," he said. Gold dealers in China's capital reacted cautiously in raising prices, fearing a drop in sales despite the fact that prices in southern China had surged to 178 yuan (22.25 dollars) per gram. China is the world's third-biggest market for gold after India and the United States, according to the World Gold Council, an industry organization. Last year Chinese demand for gold rose 8 percent to more than 250 tons
Gold price climbs over $500 for the first time in almost 20 years. The last time prices were over $500 per ounce was back in 1987
Gold reached a 4 year high in anticipation of the invasion of Iraq and subsequent political and economic risks.
October of 1999 saw 15 European central banks limit supply which pushed gold price to just short of $340 per ounce a 2 year high.
In August 1999 following central bank sell offs the gold price dropped to about $250 per ounce and was compounding by mining companies short selling stock in anticipation of more price pressure.
1980 - 1990 Review
In January of this year gold peaked at $850 per ounce due to investor demand. High inflation and geopolitical risks prompted moves into safe havens at the time.
1970 - 1980 Review
The dollar was devalued further, and gold climbed upwards of $40 per ounce.
Gold price climbed to $38 per ounce.
The dollar came off the gold standard which had been in place since the Bretton Woods Agreement of 1944.
Why Do We Get Gold Price Peaks?
The reason for all these record high prices is basically the same, the erosion in value of each of the currencies. This has happened to all currencies and monetary systems, ever since the first ones were introduced by the ancient Greeks almost three thousand years ago.
In the old days, money was simply lumps of gold, silver or copper, and its value closely reflected the value of its actual intrinsic metal content. Even then, some money issuers reduced the weight or purity of their money over a period of time, sometimes gold plating or silver plating it to disguise the deception.
Once we switched to paper money (blame the Chinese), this deception or illusion became easier. Inefficient or dishonest rulers and governments could cheat their citizens and taxpayers by printing more money or refusing to redeem it for its original value. Because this is also a method of stealth taxation, it is very popular with many governments. Taxpayers and voters often fail to realise what is happening until it is too late, and by this time there is often a new government left to continue, and perhaps try to clean up the mess left by the previous one.
When you own a banknote, you are relying on the issuer to still to around, and solvent when you come to redeem or spend it. You are also relying in the issuer to maintain its value. The issuer is a counterparty, and you are exposed to counterparty risk.
When you own gold bullion, or silver, or other precious metals, you are exposed to the fluctuations in the bullion markets, but there is no counterparty risk. Even the market price fluctuations are slightly illusory. It could be considered that an ounce of gold is an ounce of gold, and remains the same ounce of gold whatever happens to its value when measured against a fiat (paper) currency. It is actually the value of the paper currency which is fluctuating against the ounce of gold.
The Gold Standard
We expect everybody to have heard of the gold standard. It was a system whereby many countries guaranteed to exchange their paper money for gold at a fixed exchange rate. Even this arrangement includes counterparty risk, because governments could run up deficits then default on their promises to exchange, or devalue by changing the exchange rate.
It is difficult to define exact starting dates for "the gold standard" because different countries used it is varying forms over long and periods of time, but for most major western countries it was in use at least from the 18th to the 20th century.
The gold standard came to an effective end between 1931 and 1934 for most countries.
Bretton Woods - The Gold / Dollar Standard
At Bretton Woods in 1944, a new international financial system was hatched. The US government guaranteed it would exchange the US dollar for gold at $35 per ounce, and many other countries adopted a fixed rate of exchange between their own currency and the US dollar.
The have been defaults and devaluations along the way, and the US eventually reneged on its guarantees in 1971, after the French government started to exchange dollars for gold, and the costs of the Vietnam war adversely affected the strength and value of the US dollar.
At first a two tier system operated, whereby governments could exchange at $35, but others could only exchange at $42, but this temporary fudge was always doomed to crumble.
Eventually the US government abandoned all fixed rates between the US dollar and gold; the dollar being left to float, or more correctly, to sink.
By 1980 gold hit its then all time high of $850 on 21st January 1980. This meant the US dollar was worth only 850/35 or 1/24th of its previous value in only 10 years!
What had started as a kind of gold standard had become a dollar standard.
The Dollar Standard
Since 1971, most countries in the world have held most of their reserve currencies in American dollars. This made much sense, as the USA was the wealthiest nation, it was relatively politically stable, and there were few practical alternatives.
Because the US dollar and the US government was now held in a favoured and esteemed position, this has made it easier for US governments to run high levels of deficit, and get away with it. For the past 10 years, we have read analyses and arguments that the US treasury was printing too much money (and we include bonds, and other loans as money), and that its exchange rate was artificially high, too high, and therefore must eventually fall. We believe this has been happening.
The most recent low gold price in US dollars occurred on 20th July 1999 when gold fixed at $252.80 US per ounce. Since then, gold has again risen, this time to over $1,000 per ounce, so against gold, the US dollar is worth less than a quarter of its real value only 10 years ago. Many believe the dollar has much further to fall, and this is a distinct probability. A complete meltdown is also possible and we could yet witness a run on the US dollar.
Similar to the French in 1970, the Chinese have expressed interest in seeing a new international standard reserve currency. Most of China's currency reserves are held in dollars, and if we were the Chinese government, we would be trying to get rid of them in exchange for gold, silver, euros, copper, oil, or almost any hard commodity. We believe this is happening now. Of course the Chinese government will be aware that if they publicise their moves in advance, this may in itself cause panic, and a run on the dollar. Whatever your views on the intelligence of the Chinese government, we do not expect them to be so stupid as to trumpet their moves in advance. Individuals and investors will need to make their own assessments, and trust their own judgements. Certainly we would rather continue to hold gold and silver rather than dollars or pounds for the foreseeable future.
Euros SDRs or What?
The Chinese have called for a new form of reserve based on the old Special Drawing Right (SDR) system, to be administered by the World Bank or the International Monetary Fund (IMF). This would, hopefully, reduce the role of the US dollar, and spread the risks of default from one major country to a larger number of countries. On the face of it, this seems to be a very simple, but an extremely good idea.
The euro is now a major currency, although it is still quite young, and their are well publicised strains within the euro system. The euro therefore will almost certainly be represented among the currency reserves held by many nations.
It would also mean the any US government which ran large deficits would be found out more quickly, and do less collateral damage to innocent bystanders.
Gold Silver & Precious Metals
It is quite likely that any International Supercurrency would hold a basket or selection of other currencies as part of its reserves, but it would almost certainly continue to hold a significant proportion of its reserves in gold, and possibly silver.
The private citizen is free, in most civilised countries, to store his own reserves in gold, silver, or other precious metals. In the EU, gold has been officially recognised as an legitimate investment since 1st January 2000, when VAT was removed from "Investment Gold".
A significant part of our business is making a market in gold coins and small bars (up to 1 kilo) for individuals and investors in the UK, EU, and elsewhere.
We try to maintain a neutral stance, and state of mind, when attempting to analyse the market, and make forecasts. We try to simplify this as much as reasonably possible.
Most people would probably expect us to enthuse about gold, talk it up, and always recommend it as a good investment and a good buy. We try to be realistic and conservative in our approach. We hope that most of our readers and customers will understand and appreciate this. Sometimes our apparent neutrality causes some investors to postpone or delay their buying decisions. While we regret this, as do most who procrastinate, we would rather maintain our integrity.
On balance, and most of the time, we do remain gold bulls. It was rather frustrating recently. Since gold hit a sterling high of over £690 per ounce on 20th February 2009, it has languished around £570 per ounce between June and August 2009, and we were at the time strongly (for us) suggesting that the drop represented a good buying opportunity, and that the underlying principles above still held good.
We also never cease to wonder why investors lose interest when prices dip off, then rush in once prices have already risen.
It seems to us that many people only buy when prices appear to be going up, when it should be the other way round, prices should start to rise because people have started to buy. Is this a herd mentality? If so, we would encourage any investors to invest some time and effort into thinking about the market, and taking decisive action before the rest of the herd. Be a leader instead of a follower.