Gold is a precious metal that has been used as a form of currency, jewelry, and other decorative items for centuries. The value of gold is determined by its purity, with the purest gold being 24 karats. However, since pure gold is too soft to be used for many applications, it is often alloyed with other metals to create a stronger product.
Gold prices fluctuate constantly depending on various factors, such as geopolitical events, the stock market, and supply and Demand. Historically, the price of gold has been very volatile, reaching an all-time high in September 2011 before experiencing a sharp decline.
As of January 2020, the price of gold is around $1,560 per Ounce.
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All-Time High Gold Prices
On September 6, 2011, gold prices hit an all-time high of $1,917.90 per Ounce. Gold prices have risen ever since, reaching new heights in August 2020. Some experts believe that gold prices could continue to rise in the years to come.
1980 Gold Price – $850 per Ounce
In January 1980, gold prices hit an all-time high of $850 per Ounce. This was a record-breaking price at the time, representing a nearly 1000% increase from the gold price just ten years prior.
While many factors can influence the price of gold, the main driver in 1980 was inflation. In the early 1970s, inflation rates were high and only increased in subsequent years. By 1980, inflation had reached double-digit levels in many developed countries, and this helped to push gold prices to their record highs.
In addition to inflation, another factor contributing to higher gold prices in 1980 was the Iran-Iraq war. This conflict caused disruptions in the oil market and increased oil prices. As a result of higher oil prices, many investors turned to gold as a haven investment.
After peaking at $850 per Ounce in 1980, gold prices underwent a prolonged decline. It was in 2002 that gold prices regained their previous peak level. Since then, gold prices have experienced ups and downs but have remained relatively strong.
2011 Gold Price – $1,917 per Ounce
On September 6, 2011, the price of gold reached an all-time high of $1,917.90 per Ounce. This was more than $200 higher than the previous record set in 1980 and marked a nearly 12-fold increase from the price of gold just two decades earlier.
What caused such a dramatic increase in the price of gold?
Several factors contributed to the surge in gold prices in 2011. One was the uncertainty surrounding the European debt crisis. This led many investors to view gold as a haven asset, which drove Demand and prices.
In addition, quantitative easing policies implemented by central banks around the world boosted investor demand for gold as a hedge against inflation. The combination of these factors resulted in strong Demand for gold, which helped push prices to record highs.
2012 Gold Price – $1,895 per Ounce
On August 23, 2011, gold prices surged to a record high of $1,917.90 per Ounce. This was due to several factors, including concerns about the ongoing debt crisis in Europe and inflation. Gold prices then fell back to around $1,700 per Ounce by the end of the year.
In 2012, gold prices again hit an all-time high, reaching $1,895 per Ounce on September 6. This was due to continued concerns about the European debt crisis and increasing tensions in the Middle East. Gold prices then fell back to around $1,700 per Ounce by the end of the year.
In 2013, gold prices remained relatively stable, hovering around $1,700 per Ounce for most of the year. However, there was a brief price surge in April due to concerns about the possible use of chemical weapons in Syria. Gold prices then fell back to around $1,700 per Ounce by the end of the year.
So far in 2014, gold prices have remained relatively stable, hovering around $1,300 per Ounce. However, there has been a recent price surge due to tensions between Russia and Ukraine and continued concerns about inflation.
2013 Gold Price – $1,560 per Ounce
In recent years, gold prices have risen, reaching highs not seen in decades. After hitting a record high of $1,920 per Ounce in September 2011, gold prices fell sharply, eventually stabilizing around $1,100 in 2015.
Despite this dip, gold prices have again begun to climb, reaching a new high of $1,560 per Ounce in August 2019. So far this year, gold prices have averaged around $1,500 per Ounce. With global economic uncertainty continuing to drive Demand for safe-haven assets like gold, prices could continue to rise in the months and years ahead.
Reasons For The Price Increase
It is no secret that the price of gold is on the rise. While numerous factors contribute to this price increase, the most significant reason is the instability of the global economy. In times of economic turmoil, investors flock to gold as a haven for their assets. The following paragraphs will explore other contributing factors to the price of gold.
Inflation
Inflation happens when the prices of most goods and services rise over time. It’sIt’s calculated using a price index, like the Consumer Price Index for Urban Consumers (CPI-U). The CPI-U tracks changes in consumer prices for a typical market basket of consumer goods and services.
Inflation can have different effects, depending on whether you’re an earner or a saver:
As an earner, inflation can push your wages in line with the rising cost of living. This is good news if you’re trying to maintain your standard of living.
As a saver, inflation can reduce the purchasing power of your savings – meaning that your money won’twon’t go as far as it did in the past.
Economic Uncertainty
In times of economic uncertainty, businesses tend to increase prices to protect their bottom line. This is especially true for essential goods and services, like coffee. The coffee price has risen recently due to several factors, including weather conditions, labor costs, and supply constraints.
The most significant factor contributing to the price increase is the ongoing drought in Brazil, the world’s world’s largest coffee bean producer. The drought has reduced Brazil’sBrazil’s crop yield by an estimated 30-40%, leading to a decrease in global supply and an increase in prices.
In addition to the impact of the drought, labor costs have also risen in recent years. This is partly due to the increased minimum wage in many coffee-producing countries. For example, Colombia’sColombia’s minimum wage increased by 32% between 2016 and 2017. These wage increases put pressure on growers’growers’ margins and have contributed to higher consumer prices.
Finally, another factor driving up coffee prices is a change in consumer demand. In recent years, there has been a shift from mass-produced coffee to specialty coffees with unique flavor profiles. This change in preferences has increased Demand for certain types of beans, driving up prices for these specialty coffees.
While many factors influence coffee’s price, these are some of the most significant ones. With global supply constrained and labor costs rising, we’ll likely continue to see prices increase in the coming years.
Jewelry Demand
Gold is primarily seen as a financial asset and store of value, but Demand for jewelry is still significant. In 2019, jewelry demand totaled 3,751 tonnes, just below the 10-year average but represented a decrease of 2% from the previous year.1
The largest jewelry segment is bridal/wedding gold, which made up 43% of Demand in 2019.2 Investment demand (for bars and coins) and Demand for technology (primarily in electronic products) are the other key components of total gold demand.
While total jewelry demand has been fairly stagnant in recent years, there are some bright spots. In 2019, Chinese and Indian jewelers enjoyed their best year since 2013 thanks to easier access to credit, favorable economic conditions, and growing consumer confidence.3 In India, the rollout of a nationwide Goods and Services Tax (GST) also helped to boost retail sales.4
Despite these positive trends, it’s important to remember that jewelry demand is highly dependent on cultural factors and can be volatile. For example, Chinese Demand for gold jewelry plummeted by 30% in 2015 as the government cracked down on corruption and luxury spending.5
Central Bank Buying
One of the primary reasons for the recent price increases has been the increasing Demand from central banks. In 2018, central banks worldwide bought a record 651.5 tonnes of gold, according to the World Gold Council. That represented a 74% increase from 2017 and was the fourth consecutive year of central bank net gold purchases.
Why are central banks buying so much gold? There are a few reasons.
First, many central banks view gold as a hedge against inflation and economic uncertainty. As such, they see it as a way to diversify their reserves and protect against downside risks.
Second, many countries are looking to increase their reserves of foreign currency-denominated assets, and gold is seen as one of the most liquid and easily-traded assets.
Finally, some countries see gold as a way to reduce their dependence on the US dollar – Iran, for example, has been diversifying its reserves away from dollars in recent years.
Conclusion
Gold prices have reached record highs in recent years, culminating in an all-time high of $1,900 per Ounce in September 2011. However, prices have since retreated and are currently hovering around $1,300 per Ounce. Despite recent volatility, gold prices remain significantly higher than they were just a decade ago.
