Attention Gold Bugs: Warm up your credit cards!

Back in 2007, we ran this terrific chart by JP Koning of the History of the Dow. JP is at it again, this time, devising this fascinating pictograph showing the Recent History of Gold.

JP adds:

“The Recent History of Gold Wall Chart contains the gold price from 1954-2009, as well as 26 crucial events that dramatically affected that price, including the Cuban Missile Crisis, the 1973 oil embargo, and the 2001 World Trade Tower bombing.

Also unique is our inclusion of prices from 1954-1968, when gold was fixed at $35. In actuality, the gold price fluctuated in a narrow band between $34.80 and $35.20, and was much influenced by world events. Our chart is one of the first to return to this lost data and analyse it.”

Educational and fascinating . . .

Category: Commodities, Currency, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

51 Responses to “The Recent History of Gold, 1954-2009”

  1. Marcus Aurelius says:

    They’re going to have to expand that chart vertically – by about 600% – to accommodate the price in the coming year or so. OTOH, maybe it’ll crash back to $35, or so (if it does, the dollar will be worth a fraction of a penny).

  2. Stuart says:

    Excellent charts. Alot of wealth moving away from FIAT currencies.

    http://www.ft.com/cms/s/0/359da604-f6d4-11dd-8a1f-0000779fd2ac.html

  3. JohnDoe says:

    How can gold possibly go up much more than 10-15% more if everybody (and their grandparents) are already invested in gold fully expecting it to skyrocket? You seldom get as much consensus for an investment as there is out there for gold right now. I just don’t see how it can work.

  4. Stuart says:

    One out of a bazillion might own gold.

  5. Marcus Aurelius says:

    Supply and demand. Fiat paper (and what it always does) vs. cold, hard cash. They don’t call the rush to gold the “flight to safety” for nothing.

  6. tranchefoot says:

    I’m very leary about going long gold. I can see it as a store of value, but as an investment I’m not so sure. The price is too easily manipulated by central banks who don’t like their fiat currencies competing with gold. Furthermore, Russia and the IMF are both broke and could turn to the gold market at any time to raise cash for debts and bailouts…

  7. Stuart says:

    Get your life vest on in that case, cause you’re about to drown in treasuries.

  8. Machiavelli999 says:

    I think gold bugs are truly delusional. Gold is like any other asset. Its price is determined by supply and demand. And just like with equities, real estate and the rest of the commodities, when a holder of gold loses his job, he must liquidate his savings. What he will find is that McDonald’s does not take gold coins and accepts only US dollars. Just like McDonald’s does not take stock or futures contracts on oil as payment.

    So, the holder of gold, will have to sell his gold and “buy” the dollar in order to eat.

  9. Machiavelli999 says:

    “Stuart Says:
    February 10th, 2009 at 10:49 am

    Get your life vest on in that case, cause you’re about to drown in treasuries.”

    This is another thing that must bug the gold bugs. Why is everyone flocking to Treasuries when they can just invest in wonderful gold?

  10. Stuart says:

    hold that thought.

  11. tranchefoot says:

    “Stuart Says:
    February 10th, 2009 at 10:49 am

    Get your life vest on in that case, cause you’re about to drown in treasuries”

    False choice.

  12. Moopheus says:

    “I can see it as a store of value, but as an investment I’m not so sure.”

    How can it be one but not the other? That makes no sense. Except that with an investment, if the price goes down, you know how much money you lost, whereas “store of value” is a vague and meaningless concept. How does gold “store value”? Is it like a capacitor that you charge up? Plug it into the value socket? Is there some “value” that it magically has intrinsically, despite being one of the least necessary elements on the face of the planet for the continuation of life? Or is that gold bugs see their preciousss glowing in the dark, always glowing, glowing.

    Personally, I’d rather be heavily invested in rice. When the shit really hits the fan, what really matters? You never hear about people having “gold riots,” do you?

  13. Marcus Aurelius says:

    If it comes to rice as money, all bets are off.

    The history of mankind (including ALL cultures) is riddled with stories of people risking life and limb to obtain and hold gold. Why? Who knows – maybe we’re like bower birds. People might not riot for it, but they’ll kill and/or die for it. If it has no value – or is “worthless” – why do banks continue to hold it? Why does (or did) our Constitution mandate its use for the coin of the realm?

    If you have no use for it, or if you place no value on it, that’s fine by me – some people are still holding GM paper as a “store of value”.

  14. JohnDoe says:

    Stuart Says:

    February 10th, 2009 at 10:27 am
    “One out of a bazillion might own gold.”

    And yet you post a link in which the first sentence is, “Investors are buying record amounts of gold bars and coins…” So which is it Stuart, one of a bazillion own gold or is “alot of wealth moving away from fiat currencies”? Cannot possibly be both.
    Every time I turn on CNBC there is another “expert” telling everybody to get into gold. Furthermore if you are invested in gold as protection against the dollar that means you must be bullish on some other currency relative to the dollar. Asian currencies, Euro, Ruble, all not looking too good. This “no brainer” investment in gold seems crazy to me.

  15. Stuart says:

    TurboTim: Unless it is still coming, so far a big nothingburger.

  16. Marcus Aurelius says:

    Not too many people hold physical gold, and demand has skyrocketed. Both.

  17. tranchefoot says:

    Moo,

    When fiat currencies are failing and you don’t know which one(s) will reign supreme, gold can presumably be converted into the “winning” currency at some point in the future. This is what I mean by store of value. By investment, I mean an asset that can reasonably be expected to increase in price. I can see a situation where gold demand for use as a store of value remains sky high, but where price does not appreciate significantly because of dedicated sellers like Russia or the IMF. I’m just thinking out loud. I really have no idea what I’m talking about… :)

  18. Marcus Aurelius says:

    Look at the flight to safety. It’ll correct, but that will only be to take a breather.

  19. Mannwich says:

    Off topic: Markets don’t seem to like game of “pretend” today. Maybe “charades” would be better. The insanity continues…….

    Where’s the PPT when you need them?

  20. Marcus Aurelius says:

    The PPT is buying gold.

  21. Brendan says:

    Is it just me or does gold seem to have been as bubbly as every other commodity over the last few years, except it’s the only one that hasn’t crashed… yet…

    Personally if I were going to invest long in a metal, I’d chose aluminum or copper. There will be a lot of demand for those metals over the coming decades for powerlines and electric motors. Just like gold, they have some intrinsic value but are going to see more use in the future, not less. Electronics makers are trying to find ways to minimize or eliminate gold from production because it’s become so inflated, and the wealth flaunting fad is cycling out right now. Gold might be a great buy in ten years, but seems like the only reason to buy now is because you assume a majority of people are panicking more than you are right now and are dumb enough to believe that gold is somehow mystically different than any other commodity. Seems like a lot of hype. If it were really about jewelery being timelessly valuable, then you’d see a huge run-up in diamond, peril, ruby, etc. prices; but you don’t hear about that, only hype about gold. Instead I hear that many jewelery shops are struggling, which means LESS demand for gold. No one sails ships full of gold bullion for the queen anymore. Sure there are a lot of people that believe that, but the supply of these naive people has to be running low at this point with the current saturation of “here’s how to order” Monex commercials and “Meth…” err… “Cash for Gold” where you send you stolen jewelery in to be melted down to eliminate the evidence.

  22. Marcus Aurelius says:

    “No one sails ships full of gold bullion for the queen anymore.”

    If there were a major gold find tomorrow, the ships would sail on Thursday. Supply is limited. Gold is not just a commodity, and it’s not just jewelry – it’s money (for many reasons, among which are: limited supply, does not tarnish or degrade, is easily transportable, is recognized universally as having value, is not consumed for industrial purposes, etc.).

  23. tranchefoot says:

    For some people, the lure of gold is that it is convertible into any currency. This is why there is currently so much demand from europe. The euro is built on sand. The EU is still experimental.

  24. Stuart says:

    “For some people, the lure of gold is that it is convertible into any currency. This is why there is currently so much demand from europe. The euro is built on sand. The EU is still experimental.”

    Very true. Good point.

  25. Marcus Aurelius says:

    “The euro is built on sand.”

    ALL fiat currencies are built on sand. The dollar is backed by “the full faith and credit (credit!) of the US government.”

    You can take that to the bank.

    Oy.

  26. JustinTheSkeptic says:

    Johndoe, that is exactly why gold is the investment of the future, i.e. it is a piece of mass that people know will be there – the dollar, euro, yen, etc. might not, after all if history is any guide, all fiat currencies in the past have failed given enough time.

  27. ZackAttack says:

    I feel that owning oil reserves in the ground captures every important thesis that gold covers, with the added benefit that not as many crazy people trade it.

  28. austincompany says:

    I am reminded of the movie “Gone With the Wind”, where Scarlet is searching her empty, trashed home for money. Her deranged father happily states, “We have lots of Bonds!” Scarlet is excited until she finds they are Confederate Bonds – now worthless. She then asks, “We have no gold?”

    The point is that people throughout times have regarded gold as good (or better) than paper money. And in the example above, when a nation destroys their currency (like the U.S. today), gold is one of the few hard assets the “common man” can own that (hopefully) will retain value.

  29. Marcus Aurelius says:

    Oil is consumed, and you can’t carry a barrel of it in your back pocket.

  30. judyo says:

    Barry: Any thoughts on Adam Fergusson’s “When Money Dies” ??

  31. whosonfirst says:

    To all the naysayers – gold is the original money. Everything else that has been used as money is a substitute for gold. And from the standpoint of a store of value, everything else has been a poor substitute.

    If you can badmouth gold in the current environment, I don’t know what planet you’re from.

  32. Short Man says:

    As of a couple of years ago, only about 2% of retail investors owned gold, gold ETF’s, or gold mining stocks in their investment portfolio. Obviously some of those may have indirect investments through mutual funds but as far as direct investment it is nominal. Even if that figure has increased to 3 or 4%% in the past year due to the credit crisis, there is plenty of room to increase the % of investors with gold exposure. I’m sure a much much larger proportion of investors held tech stocks circa 2000.

  33. leftback says:

    Sell the news reaction to Tiny Tim, as predicted. The reflation trades are still looking reasonably strong. I am buying more TBT for a trade today. Every day doesn’t have to be my day, but most of them will be going forward.

    A lot of you will shake your heads in dismay when you re-read your posts on gold later in the year, although I agree with Zack that oil and other physical commodities are also useful investments here. You can buy your GE bonds and technology stocks – Stuart and I will stick to gold and miners. See you in December. Most people have no idea how to invest in gold or gold stocks, and even a small movement in this direction will result in a melt-up.

  34. Broken says:

    Never did understand buying gold. 80% of the value is psychological. Hold a hedged stock position, much safer than gold- or treasuries for that matter. I know, you can’t short in most IRAs. Stupid rule.

  35. zebov says:

    I hold a small amount in gold purely for the store of value. With the leisurely tossing around of the word Trillions when discussing all the bailouts and “stimuli,” I’m not convinced of the dollars long-term value. Sure, short term it seems that prices are dropping, but this is all short term. Historically the dollars value has dropped and I don’t see how the current economic conditions are going to turn that around long term.

    On the other hand, over thousands of years, gold has been valued by our human race. There’s a fixed amount of gold in the world. I’m on the side that thinks the human race will still put value in gold throughout my lifetime. If I am right, gold is a great way to make sure you don’t go bust just because a government or economy does. I’m not trying to make a bunch of money off gold… I’m just trying to keep what I got.

  36. Chuck Ponzi says:

    I call bullshit. Gold is as much money as any other asset, so it deserves no preferential treatment. It is not the “original money”; that was wampum, grain, furs, and anything of value. This thread was infested with goldbugs long on enthusiasm and short on historical reference.

    Gold is as bubbly as any other asset. consider this:

    http://www.socalbubble.com/2008/12/one-of-these-kids-is-not-like-the-other.html

    It’s a flight to safety. If it goes up much more, it’ll be a super-bubble asset like housing and stocks before. It doesn’t change that the cost of production and price on the open market are out of whack… especially considering the state of the economy around the world.

    It would be akin to me buying canned veggies… at least I can eat those if things get bad.

  37. Moopheus says:

    “gold is the original money”

    Nope. Cowry shells were the original money. In fact, cowry shells remained money for thousands of years. Sure, people killed each other for gold, but people killed each other over land, religion, politics, skin color, and a lot of other stupid reasons. People value the most useless things the most, because they are fucking stupid. It’s true: people value gold, people value gold enough to be willing to poison our drinking water for it. That’s pretty fucking stupid. We deserve what’s coming to us.

    Money and gold are not the same. One is a metal we dig out of the ground; the other is an abstract concept we make up for ourselves. Money does not exist in nature.

  38. Pat G. says:

    As government’s around the world continue to “ride to the rescue” by taking on more obligations to prop up their economies this will in effect debase their currencies. Precious metals have been with us for a few thousand years. Money is relatively new in comparison. I will go with what has stood the test of time. It takes time and effort to find precious metals, dig them out of the ground and refine them. On the flip side little time or effort is necessary to print money as quantities are unlimited as long as there are trees. Any moron who has a printing press, plates, paper, ink and who can flip a switch can print money.

  39. Marcus Aurelius says:

    Ya’ can’t counterfeit gold – ask any (fucking stupid) alchemist.

    Cowry shells were used extensively as money in Africa, and traded in several areas of North America, in areas where they were exceedingly rare (not necessarily used as money).

    Gold, on the other hand, has been used the world over, since the dawn of civilization, by unrelated cultures, as a medium of exchange. From China to South America, and from ancient Mesopotamia to modern NYC.

    I’ll believe gold has little value as soon as the central banks haul theirs out to the dumpster.

  40. CoolChange says:

    Some folks I know, who you might call crazy, buy gold and keep it handy. Others “Invest” in it. If the dollar zeroes out, then you had best have gold in hand and not in your portfolio.

  41. Brendan says:

    @ Chuck Ponzi – exactly!

    How can anyone seriously sit there and say gold is money. Gold isn’t nearly as liquid as hard cash. Even if cash collapses tomorrow and is worth next to nothing by the wheelbarrow full, there isn’t nearly enough gold just floating around to become a new “black market” alternative currency. This isn’t 1849 California. People aren’t going to be carrying around satchels full of gold dust all the sudden and merchants buying scales to weight it with. People don’t have the connection to actual gold that we did for the last few millennium prior to the last century. Would 3/4 of people alive in the US today even be able to distinguish real gold from fake? I don’t think I would. If I tried to buy a car with a gold brick (or a few barrels of oil for that matter) I’d be looked at like an idiot. The seller would probably have no clue if I was trying to give him a gold painted piece of lead. He or she would be better to get a signed IOU from me than to accept that. At least that would hold up in court, or convince Vinney that my leg needs to be broken when I don’t hold up my end of the deal. Gold is not money in today’s society.

    I find it more likely that in a true collapse of the dollar, people would find a more appropriate replacement currency that meets the times. People would trade something they are actually familiar with or just barter. This all assumes that you’re in the tin-foil the-world-is-going-to-end camp. But if you instead think that the dollar is going to significantly devalue (which is way more realistic), then gold still doesn’t seem like a good investment compared to other commodities that are equally as (il)liquid as gold. Platinum has slightly more value per ounce (if you need to transport it) and could just as easily be traded between currencies, and copper has more intrinsic value, and both are not as inflated. Both of those metals (and oil for that matter) are all worth half of what they were a year ago, gold is the same price as a year ago. Which is the still the bubble? Go ahead and buy into the bubble if you want, but don’t tell me gold in money any more than than the scrap steel in my garage or an old coin collection is money. All have value based on their weight and composition, but none is money in today’s society. That’s not to say I couldn’t trade it for something, but there are a lot of things I could trade for something else that people aren’t overly invested in.

  42. Marcus Aurelius says:

    Brendan:

    A gold-backed currency is still possible – and preferable to fiat.

  43. CoolChange says:

    Brenden,

    I have a platinum wedding ring that looks and feels just like stainless steel. My wife’s ring looks like tin. The shear amount of copper and steel that I could rip out of my office right now testifies to how common it is. People all over the world, who have never invested in a stock, have a little stash of gold(probably jewelry or coins) that the keep hidden away.

    Gold is over priced right now. Maybe a bubble. I’m not buying it because the value will go down when things calm down. But then again, I already have all the gold I need. I’d rather have a $10k bar of gold laying around the house than 10k in cash.

  44. gms777 says:

    Gold spikes during periods of extreme political fear, such as in 1979 and 1980 when the Iran-Iraq War began.

    That’s what Barry’s charts above show.

    If you think, as VP Biden predicted, that some dire international test will befall the U.S. during the first months of the Obama administration, gold might just be a good short-term bet, especially if you think that investors will continue to flee U.S. equities because nobody seems to know how to get out of the pickle we’re in.

  45. Brendan says:

    @Marcus – That assumes gold would chosen to back currency again. For the US to unilaterally decide to go to gold backing would not be beneficial to the US, so if you assume the whole world does, would the powers that be really want that? What countries would benefit from that, and what countries would lose? What kind of instant transfer of wealth would that create? The stashes in Fort Knox aren’t what they used to be and there are a hell of a lot more dollars out there and the US still has a lot of sway in the world still. It’s been quite a while since currency was gold backed and a lot of gold has moved that doesn’t relate to how money and wealth has moved since then. For the world to decide tomorrow that countries currently holding gold would instantly have more money than countries not would be quite controversial. Not that it couldn’t be done, but it would result in huge losses for certain players. Even if a backed currency does happen (which I see as about as likely as us going back to the horse and carriage – for all of the flaws with the automobile, it’s still far superior), why instantly assume it’ll be backed by gold?

    @Cool Change – your office is more valuable in one piece than it is in scrap materials, so to rip it apart for scrap doesn’t make sense. I mean really, does everyone around here think that we’re heading toward Armageddon, or what? If Armageddon does happen, then you should have bought some good farm land and a gun…forget gold. If Armageddon doesn’t happen, your $10K in gold could easily be worth only $5K if its value adjusts to match other commodities over the last year, so that really isn’t a good investment (which is my point). If the only thing to happen is devaluing of currency, then you still should have picked something other than gold, which is high relative to a vast number of other possible investments available for trade on the world market (the materials above are just a few of the possible examples). Seems like a lose-lose-lose proposition to me. Why is the choice only between cash or gold? I’d spend 10K on a non-inflated commodity or to better insulate my home before I’d get 10K worth of gold. It’ll either keep my heating bills down (assuming that Mad Max doesn’t show up), or it’ll keep the house from getting so cold in the winter if the Thunderdome is built and I can’t afford energy. Or, if the dollar halves in value, I’ve gotten twice as much labor and materials for my money. And who’s to say that the government doesn’t decide to take your bar of gold “for the greater good” at any point in time for Marcus’ gold-backed currency. It’s unlikely that my new insulation will be ripped out for any reason. I can understand being worried about inflation; but gold… seriously?

    The way I see it, buying $X of gold right now is the same as betting half that amount that more people will become so paranoid that they will continue to buy gold. You have to assume that people will speculate that it’s worth more than people already speculate it is worth. If recent history is a guide, that’s a pretty ballsy bet. There’s no logical reason to buy it otherwise.

  46. Brendan says:

    @Marcus – That assumes gold would chosen to back currency again. For the US to unilaterally decide to go to gold backing would not be beneficial to the US, so if you assume the whole world does. Would the powers that be really want that? What countries would benefit from that, and what countries would lose? What kind of instant transfer of wealth would that create? The stashes in Fort Knox aren’t what they used to be and there are a hell of a lot more dollars out there and the US still has a lot of sway in the world. It’s been quite a while since currency was gold backed and a lot of gold has moved that doesn’t relate to how money and wealth has moved since then. For the world to decide tomorrow that countries currently holding gold would instantly have more money than countries not holding would be quite controversial. Not that it couldn’t be done, but it would result in huge losses for certain players. Even if a backed currency does happen (which I see as about as likely as us going back to the horse and carriage – for all of the flaws with the automobile, it’s still far superior), why instantly assume it’ll be backed by gold?

    @Cool Change – your office is more valuable in one piece than it is in scrap materials, so to rip it apart for scrap doesn’t make sense. I mean really, does everyone around here think that we’re heading toward Armageddon, or what? If Armageddon does happen, then you should have bought some good farm land and a gun…forget gold. If Armageddon doesn’t happen, your $10K in gold could easily be worth only $5K if its value adjusts to match other commodities over the last year, so that really isn’t a good investment (which is my point). If the only thing to happen is devaluing of currency, then you still should have picked something other than gold, which is high relative to a vast number of other possible investments available for trade on the world market (the materials above are just a few of the possible examples). Seems like a lose-lose-lose proposition to me. Why is the choice only between cash or gold? I’d spend 10K on a non-inflated commodity or to better insulate my home before I’d get 10K worth of gold. It’ll either keep my heating bills down (assuming that Mad Max doesn’t show up), or it’ll keep the house from getting so cold in the winter if the Thunderdome is built and I can’t afford energy. Or, if the dollar halves in value, I’ve gotten twice as much labor and materials for my money. And who’s to say that the government doesn’t decide to take your bar of gold “for the greater good” at any point in time for Marcus’ gold-backed currency. We’re back to the land and gun. It’s unlikely that my new insulation will be ripped out for any reason. I can understand being worried about inflation; but gold… seriously?

    The way I see it, buying $X of gold right now is the same as betting half that amount that more people will become so paranoid that they will continue to buy gold. You have to assume that people will speculate that it’s worth more than people already speculate it is worth. If recent history is a guide, that’s a pretty ballsy bet. There’s no logical reason to buy it otherwise.

  47. Brendan says:

    Sorry for the double post. Please ignore the one at 4:28.

  48. royrogers says:

    I thought the Gold price was fixed now, atleast they are trying to keep a lid on it
    from going over 1000
    They could also confiscate gold for US investors , if it really started to react to
    the fall in the USD.

  49. royrogers says:

    guys, the difference between the other commodities like oil and gold is that
    demand has cratered for the other commodities, while gold, being the original
    currency has held up well.
    If I see 90% of this board siting fundamental reasons for owning gold, then that
    will be the time to unload it.
    ////////////////////////////
    JohnDoe Says:
    February 10th, 2009 at 10:21 am

    How can gold possibly go up much more than 10-15% more if everybody (and their grandparents) are already invested in gold fully expecting it to skyrocket? You seldom get as much consensus for an investment as there is out there for gold right now. I just don’t see how it can work.
    /////////////////////////////////////
    John, this is not the casejust look at the market cap of financials vs gold and gold stocks
    Nowhere near the bubble stage

  50. goldbuggg says:

    The only way of surviving this depression is to protect yourself by owning precious metals. Buying physical gold coins is not a speculative investment in this economic environment. In the past holding a 10% investment in gold was considered a smart hedge against inflation, but now gold and other precious metals should make up the majority of your portfolio.

    What’s interesting is that a very small percentage of US Citizens actually own physical gold. If the gold and silver ETF’s didn’t exist most people wouldn’t even pay attention to the gold and silver markets.

    Anyone that has ever held a gold coin in their hand understands the difference between the gold coin and paper fiat. It’s hard to detach people from the paper structure they grew up with, and unfortunately the majority of people that keep their money in paper will eventually become poor. The following article shows just how much demand there is for gold coins…..
    http://www.goldnewswire.net/gold-coin-shortage#gold-coin

  51. [...] February 10, 2009 The Recent History of Gold, 1954-2009 Posted by W.N. Nasserdeen under Business, economics No Comments  The Recent History of Gold, 1954-2009 [...]