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August 21, 2024 - 10:30am
Gold prices hit a new record high yesterday afternoon, with its spot price of $2,531.60 (£1,943.83) an ounce up 1% on the day. This means that a standard bar of gold — weighing in at 400 troy ounces (12.4kg) — is now worth more than $1 million. While this is a somewhat arbitrary milestone, it reflects very deep changes in the gold market.
In the early Seventies, when the US dollar was taken off the gold standard, the precious metal was trading at just over $100 an ounce. At the end of that decade and the beginning of the next, amid soaring inflation, there was a spike in the price of gold, which reached over $820 an ounce in late 1980. While the price came down shortly after this, it remained above its Seventies levels, hovering around $300-$400 until the mid-2000s.
It was after the 2008 financial crisis, when central banks turned to quantitative easing (QE), that gold prices began to rally in earnest. Gold first broke the $1,800-an-ounce mark towards the end of 2011 when the Eurozone was experiencing a sovereign debt crisis and the QE programmes were in full swing. In the post-2008 world, gold became anchored to inflation expectations, tracking yields on inflation-protected Treasuries (TIPS). Gold prices in the period reflected where investors thought inflation was headed.
But the recent explosion in gold prices appears to have little to do with inflation forecasting. Indeed, we first saw a run-up in the gold price as inflation was rising and now the value continues to increase even though inflation is widely thought to be falling and central banks are considering easing. This suggests that gold has become untethered to inflation expectations, and that something or someone else is driving the price.
That something or someone appears to be central banks, which are buying gold at a record pace. The main buyers are the Chinese, Indian and Turkish central banks, yet Russia anticipated this trend a decade ago. Moscow went through two phases of buying gold, first in the wake of the 2008 financial crisis. In the first quarter of that year, the Russian central bank held around 457 tonnes of gold; by 2014, this had risen to 1,040 tonnes.
But it was after the 2014 annexation of Crimea, which precipitated the first wave of sanctions on the country, that Russian gold-buying really started. By the first quarter of 2020, Russian gold reserves had risen to 2,300 tonnes; having purchased around 97 tonnes a year in its initial phase of gold buying, in its second the country was buying around 210 tonnes a year.
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SubscribeThe price of gold has not changed
The value of your currency is dropping
Quote right. This could be a response to the massive money printing that took place during Covid, which only now is starting to unwind. Sugar highs never last forever.
What is the price if not the rate of exchange for another thing, usually currency?
Yep, my house cost me150 ounces of gold in 1977 … exact same price today … no change.
So Gordon Brown sold our gold reserve for about 8x less than it would be today. Instead of 3.5billion it would have brought in about 28billion. I have tried to be kind to him while doing the calculations when rounding up/down.
To make you smile – it’s known as the Brown Bottom in the gold trade.
A number of online pundits (Napolitano for one) promote buying of gold quite regularly. Gordon Brown sold UK bars, I think at around 10% of the current price?
Did this article touch a nerve?
Since January 23 and every month since China has been quietly purchasing average of 30 tonnes of
Gold paying for using $ US treasury bonds
What matters is not whether the price of gold is going up (although I hope it is as I have some) but (a) who is buying it, (b) why and (c) whether the owners have physical possession/control of their gold stocks to stop the US seizing them or being in a position to control them.
What fascinates me is how disinterested in gold the average person is despite it rising inexorably in price. When house prices follow a similar parabolic trajectory as seen in gold, people go mental. It is one of the most successful psy-ops of our time- to discredit in the eyes of the general public the importance of gold. And yet the central banks buy gold at record pace. The capitalist sausage factory runs on debt and the sources of new debt are running out. Central banks know this and they also know that the only protection in the debt implosion derivatives turbo-fuelled endgame is gold. If the general public were allowed to join the dots it would also lead them to gold. And if the general public in the west begin to buy gold in earnest all hell will break loose. Because the commensurate price jump will trigger a collective ‘waking from a dream’ and confidence in paper money will break. More money was printed in the last 6 years than was spent on every bullet, tank, plane, warship and missile used in every war the USA was involved in from 1900 to the present day (inflation adjusted). WW1, Ww2, Korea, the Cold War, Vietnam, gulf war 1, gulf war 2, Afghanistan. Think about that for a moment and it becomes clearly insane. The foundation of the entire capitalist experiment is as paper thin as the notes people still (for now) believe have value.
Perhaps people could provide their views on exactly how much gold there is in Fort Knox.