Gold Price History: Highs and Lows

Investing in gold has long been a strategy for diversifying investment portfolios and as a hedge against inflation. Investing in gold is not like doing so in other commodities: there is a long-held sentiment that gold is a store of value beyond its uses. But before investing in gold, it’s important to take the long view and understand the historical fluctuations in gold prices and how those correspond with other markets.

A 50-plus-year historical chart of gold prices will help us explore the reasons behind the fluctuations. In addition, we will discuss the potential benefits of investing in gold and give tips on buying and holding this precious metal.

Gold: 50 Years of Historical Prices

Investors can gain insights into patterns and trends that inform their investment decisions by taking the long view and examining historical gold prices. For example, investors can identify long-term cycles or fluctuations in gold prices that could provide clues about future price moves or correlations with other asset classes. Additionally, analyzing long-term data can help investors see how gold has done over different periods and how it has responded to major geopolitical or economic historical events.

When looking at long-term data, it’s important to keep in mind that the past performance doesn’t necessarily indicate future results. Just because gold has done better or worse during periods in the past doesn’t guarantee that it will continue doing so. It’s also critical to consider that the specific economic and geopolitical conditions are unique and may not play out the same way again. At the same time, entirely new events are also bound to happen. Another caution to remember when analyzing long-term data is the tendency for hindsight bias. Looking at historical data with the benefit of 20/20 hindsight can lead investors to overestimate the predictability of market trends and overlook the uncertainties and risks that existed at the time.

The chart above shows the price of one ounce of gold since 1974. As you can see, the price has had several large swings over the last few decades. An all-time high in 1980 followed the lows of the 1970s. In recent years, gold has nominally reached even higher, hitting a record $2,265 per ounce in early April 2024. But, when adjusted for inflation, the early 1980s is still the peak for gold.

Investing in Gold vs. the S&P 500 Over Time

Instead of comparing gold prices over time, priced in dollars, a better way for investors to get a handle on gold prices is to compare it with a standard metric for stocks, the S&P 500. Let's say you had $200 in 1972, the year after the U.S. went off the gold standard, and you put $100 in gold and another $100 in the S&P 500. With that, you could have purchased around 2 oz. of gold, and roughly 1 share of the index.

During the first decade of your investment, you would look remarkably prescient to have stashed half your money in gold as its price appreciated rapidly, especially toward the end of the decade. This period, marked by economic uncertainty, saw gold reaching a peak, reflecting its status as a "safe haven" during stagflation, troubles in the Middle East, and so on. By contrast, the S&P 500 went the other way during the early 1970s, though it gradually recovered early the next decade and has been rising ever since.

Pausing in 1980 to review your admittedly limited portfolio, your $100 invested in the S&P 500 and $100 in gold would have been worth around $200 and $1,000, respectively, with gold in the lead. But gold largely stagnated over the next 20 years while stocks enjoyed a bullish market. By 2000, compound interest and a long bull market (before the dot-com crash) meant your original investment in the S&P 500 would have been worth $3,500, but with your gold valued at under $600.

The 2000's brought about a general upward trend for gold, especially as investors sought safety during the 2008–09 financial crisis. In 2007, your 1972 investment in gold would have been valued at about $1,285; in 2010, it would have been $2,166. Meanwhile, your investment in the S&P 500 would have dropped almost 10% over the same time.

In recent years, gold has continued to grow, reaching new highs, nominally speaking. But it hasn't risen like it had during two crisis periods in the history of the American economy, the late 1970s and the Great Recession. Looking at your portfolio again in Spring 2024, your initial $100 in gold would be worth around $4,500. Your feeling of great investment success disappears, however, when you look at the other side of your portfolio and realize what that investment in gold might have cost you. Your initial 1972 investment of $100 in the S&P 500 would now be worth over $18,500 (assuming you had reinvested all dividends along the way).

Notable Highs and Lows

Changes in the price of gold have been caused in part by the following notable events:

• The end of the Bretton Woods system in 1971, which allowed the U.S. dollar to float freely, ended the fixed exchange rate between gold and the dollar. This period was also the culmination of the stagflation crisis in the U.S., characterized by high inflation, low economic growth, and high unemployment. This all led to a surge in gold prices in the 1970s, reaching a record high of around $665 in January 1980.
• Gold reached a local low of about $253 per ounce in 1999. This resulted from the strong performance of the U.S. economy and the U.S. dollar, which reduced the appeal of gold as an alternative investment. The price of gold also fell because of oversupply in the market, as several central banks sold their gold reserves to raise funds and diversify their portfolios.
• The Great Recession post-2008 triggered a flight to safety and increased demand for gold. The gold price rose from around $730 in October 2008 to $1,300 by October 2010.
• The European sovereign debt crisis of 2010-2012 raised concerns about the eurozone's stability and the global economy. The gold price reached a new nominal high of about $1,825 in August 2011.
• The tapering of quantitative easing by the Federal Reserve in 2013-2014 signaled a gradual normalization of monetary policy and a strengthening of the U.S. dollar. The gold price declined 29% from $1,695 in January 2013 to $1,200 in December 2014.
• The COVID-19 pandemic of 2020-2021 caused unprecedented economic and social disruptions and uncertainties. The gold price soared 27% from $1,575 in January 2020 to more than $2,000 by the summer of 2020.
• Following the pandemic's peak, gold prices fell to a trading range between $1,700 and $1,900 before breaking out in late 2023 to new highs of around $2,135. It subsequently fell to a trading range just above $2,000.
• In April 2024, gold surged to new all-time highs above $2,265 per ounce, fueled by increased Chinese demand and lingering inflation concerns.

Why Does the Price of Gold Fluctuate?

The price of gold is influenced by various factors, including macroeconomic and geopolitical conditions, the pace of inflation, the amount of reserves, currency fluctuations, supply and demand considerations, and the cost of mining and refining the precious metal.

When inflation is high, the price of gold tends to rise as investors look for a safe-haven asset to protect their purchasing power and as an inflation hedge against the weakening buying power of national currencies like the dollar.

Similarly, when geopolitical tensions are high, the price of gold tends to rise as investors seek a hedge against uncertainty. If geopolitical tension or economic uncertainty exists, gold is used to ride out macroeconomic volatility. Still, these correlations don’t always hold true, and the price of gold won’t always rise in the face of inflation or broader economic uncertainty.

Like any commodity, gold's supply and demand will also influence its price. Gold has many more uses than just as a store of value. Gold jewelry and industrial applications, such as electronics and medical devices, account for a significant part of the demand for gold. As these industries wax and wane, the demand for gold will also be affected.

Also, the supply of gold is limited and can be affected by mining production, exploration, and government policies. These factors also affect the price of gold.

As a produced commodity, the marginal cost of producing new gold matters. The price will rise as gold deposits become more complicated to reach and more scarce. At the same time, new mining and extraction technologies making mining more efficient and cost-effective will reduce gold prices.

A Brief History of Gold

Gold has a unique and fascinating history, with its value and significance transcending time and geography. From its beginnings as part of ceremonial rites to its use as a currency and store of value, gold has played an essential role in human civilization for millennia. Today, gold remains a popular investment option, sought after by individuals and institutions alike for its perceived safety and potential for its increase in value.

Gold’s value to societies dates back thousands of years, long before the ancient Egyptians started crafting jewelry, statues, and religious artifacts from the metal. Gold eventually came to symbolize wealth throughout Europe, Asia, Africa, and the Americas.

However, it wasn’t until around the sixth century BCE that gold was thought to have been used as a currency. At that time, early merchants were looking for a standardized and easily transferable form of exchange that would simplify the trade in goods.

Creating a gold coin stamped with a seal proved more durable and fungible than other forms of currency at the time, such as grain-based debts. As gold jewelry was already widely accepted and recognized throughout various civilizations, creating a gold coin was a natural progression. With the advent of gold as commodity-based money, its importance continued to grow.

The Gold Standard

Gold’s role as a currency evolved and matured, and it was also being loaded onto ships bound for European capitals from the Americas. During the 17th and 18th centuries, many countries adopted the gold standard, under which the value of a country’s national currency was pegged to a specific amount of gold.

Under the gold standard, nations issued paper notes that could be exchanged for physical gold at a fixed rate. This created a sense of stability and trust in the currency, as people knew the money was backed by something tangible. In 1834, for example, the U.S. fixed the price of gold at $20.67 per ounce, where it remained until 1933. The British government similarly fixed the price at GBP 3,17 shillings and 10½ pence per ounce.

However, the gold standard was largely abandoned in the early-to-mid-20th century, as economic crises made maintaining the fixed exchange rate difficult. The Bretton Woods Agreement of 1944 established the U.S. dollar as the de facto global reserve currency and created a system of exchange rates that allowed for more flexibility in international trade.

In 1971, the U.S. abandoned the gold standard entirely, as it could no longer back up the value of its currency with gold. Instead, the U.S. and other countries moved to a fiat currency system, meaning that the value of a currency isn’t pegged to a specific commodity or metal. Once unpegged, the price of gold rose dramatically.

Today, the value of gold is determined by the factors described above: supply and demand, economic conditions, geopolitical tensions, and the cost of mining. While gold no longer serves as the basis for our monetary systems, it remains a popular investment option and a store of value for individuals and institutions worldwide.

How to Purchase Gold

Physical gold can be bought in several forms. Gold jewelry is sold worldwide in retail stores and the secondhand market. The quality or purity of the gold in such items is measured in karats (or 1/24th parts).

Another way to buy physical gold is to buy gold coins or bars from a reputable dealer. Gold bullion dealers include coin shops and some banks. Remember to consider storage and insurance for security.

Some financial institutions offer gold certificates or accounts if you don't wish to deal with the gold itself. These represent owning a certain amount of gold without taking physical possession. You can also buy stocks in companies that mine, refine, or trade gold. The value of these stocks is related to gold prices but also depends on the company's performance and other market factors.

You can buy shares in gold exchange-traded funds like SPDR Gold Shares (GLD) or iShares Gold Trust (IAU), which allow you to invest in gold without holding the physical metal. These funds hold gold, and the shares are traded on the stock exchange.

More advanced investors might consider futures or options on gold. These are contracts to buy or sell gold at a set price on a future date. They can offer higher returns but also have higher risk.

Across the internet and other media are numerous ads that offer dubious products purporting to help you invest in gold as a store of value. Sometimes these are tied to the supposed dangers of the Fed's "loose" monetary policy, the fiscal policies of certain U.S. administrations, or surviving apocalyptic so-called "prepper" scenarios, where it's never quite clear why gold would serve you better than lots of water and canned food—that is, should you even decide to invest based on two meager sets of odds, namely the apocalypse occurring and you surviving it to buy goods in an unlikely gold-based economy afterward.

But there are also the standard scams involving inflated promises for what's in gold mines, gold bars that don't have much gold, and the like." The situation has become perilous enough that the Commodities Futures Trading Commission has titled its article on the topic simply, "Gold Is No Safe Investment."

When considering buying gold, it's essential to keep the following in mind:

• Understand the risks: Like any investment, gold prices fluctuate and are subject to market conditions.
• Consider the costs: Storage, insurance, and transaction fees can affect the profitability of gold investments.
• Diversify: Gold should be part of a diversified portfolio, not your sole investment.
• Research: Do your due diligence before purchasing. This includes researching dealers for physical gold or understanding the fees for gold ETFs.

As with any investment, it's wise to consult a financial advisor to understand how gold fits into your overall investment strategy, whether you want a hedge against inflation or think it'll improve your odds of survival should the end times come.

The Bottom Line

The price of gold is reaching new all-time highs, but its price has fluctuated dramatically throughout history, influenced by inflation, geopolitical tensions, supply and demand, and mining and refining costs, reaching a century-long low in 1970, followed by an all-time high 10 years later (adjusted for inflation). In addition, long-term gold price trends don’t always map neatly onto expectations based on inflation, recession, or geopolitical events.

Despite its volatility, gold remains a popular investment option for those seeking to diversify their portfolio and hedge against inflation and macroeconomic uncertainty. However, investors should carefully consider their investment goals and risk tolerance before investing in gold and research the potential risks and drawbacks of physical ownership or indirectly investing in gold.