Gold's Price History
A Story Going Back to 1850
Gold's Price History (1850-2016)
From January 1850 to 2016, gold increased from $18.93 USD/oz to $1250.74USD/oz resulting in a total return of 6,507% or an annualized return of 2.56% per year.
1850 - 1899
As you can see from the gold price graph below, this shiny metallic substance was pretty boring stuff (in terms of price) up until the American Civil War. There was a little thing called the gold standard at that time. Which meant that the dollar price was fixed to a certain amount of gold.
There was a relief in gold prices between 1864 and 1865, where it returns from its historic highs back to a near $20 price point. This decrease correlates with the Coinage Act of 1864.
1900 - 1949
The first half of the 20th century was a dicey time for the price of gold as shown in the gold price history chart. World War I and World War II happened during this time. A slight drop in gold price is noted at the beginning of World War I. Between 1914 and 1915 Gold prices drops a mere $1 despite the waging war.
Following, World War I was a severe economic decline that led to the great depression. In order to combat the great depression the U.S. Federal Reserve needed to expand the money supply in order to stimulate the economy. As part of the New Deal, the gold standard was abandoned in March 1933.
In January 1934, the Gold Reserve Act was passed. Which among stipulations such that all gold had to be abandoned and given up to the Federal reserve, raised the price of gold from $20 per troy ounce to $35.
The next important historical event of this time was World War II. Although quite remarkable on the impact of monetary policy and world politics had little impact on the price of gold. Towards the end of word War II the Bretton Woods Agreement was put into place which established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan that backed the US dollar once again by gold.
1950 - 1999
The period from 1950 to 1970 was one of peace and prosperity at home. Following the first two world wars, this era was full of debt growth and financing that was initially productive, but later became overdone.
From 1955-1975 the US was involved with the Vietnam War. This combined with lots of domestic spending in a program know as "Guns and Butter" left the US in a precarious financial position coming out of the 1970's. The US Federal Reserve allowed the creation of a lot more claims on gold than could actually be converted into gold at the set $35 dollar price. As a result of this in August 15, 1971 the Bretton Woods System broke down, resulting in the U.S. abandoning the gold standard once again.
Abandoning the gold-linked monetary system meant a boom of money and credit. This resulted in the inflation of oil and commodities, and likewise a panic out of bonds and other debt assets. This drove the price of gold even higher to its peak in 1980.
Jimmy Carter, president form 1977-1981 hired Paul Volcker to make some tough, yet necessary decision of the economy. Interest rates were raised dramatically peaking at 21.5% in June of 1981. This resulted in a disinflationary period for the US economy as well as gold a decline in gold prices. As you can see gold prices steadily decline through the rest of the century.
2000 - 2019
The first decade of the new century gold steadily climbed in price peaking at the end of 2011. This rally, most likely fueled by the dot-com bubble bust and the subsequent financial crises of 2008 brought gold to its highest historic prices even in 2011 to 2012. As the economy seemed to recover gold prices hovered around $1200-$1500 from 2015 until 2020.