September 30, 2023


World Business Inquiries

The history of the gold price

4 min read
2 Year Gold Price History in Indonesian Rupiah per Gram

Throughout history, gold has been considered a precious metal. But until 643 BC when gold is used as a currency. Gold coins were minted and used as legal tender, but evidence of the earliest gold coins in history can be found as early as 30 BC.

Emperor Augustus, who conquered the ancient Roman empire in 30BC. and 1.4AD put the price of gold per pound equal to 45 gold coins. This was changed by Marcus Aurelius Antoninus, who lowered the value to 50 gold per pound. This lowered the price of individual coins and actually made gold more expensive. Constantine the Great reduced rare coins to 70 per pound. These emperors weren’t the only people constantly devaluing gold to raise money for their armies by taxing people, kings and queens did this throughout history going as far as invading countries. This constant devaluation of gold has hyperinflation. As the price of gold rose, so did everything else, including the incessant increase in taxes to finance the expansion of the Roman Empire. This was one of the main reasons why the Empire began to split. People couldn’t handle things anymore.

The British gold standard

Britain first set the price per ounce of gold at £ 0.89 in 1257 and raised the price by £1 every century. Paper money was printed in 1,800 countries. Initially, its value was equal to gold. Countries will accumulate gold to support its value. It serves to establish the gold standard. For a long time, the United States used the British gold standard until 1791.

When the Bretton Woods Agreement was reached, many developed countries pegged their currencies to the US dollar because it has the largest amount of gold in the world. In 1900, the price of gold was $ 20.67 USD (the gold price AUD would have been $28.33 AUD). The United States fell into a deep depression in August 1929 after the Federal Reserve raised interest rates. The stock market crash sent the country into the worst economic crisis in its history. Many investors have started trading their paper money for gold. Of course, the Treasury was panicked because the government might not have gold. The Treasury Department wants the Fed to raise rates again to strengthen the dollar’s value and make it more valuable than gold.

The U.S gold standard

High interest rates mean that the loans can be very expensive. Many businesses close because they can’t get credit. Rates also pushed the dollar lower as a stronger dollar bought less. Companies are starting to cut costs and keep prices low to stay competitive. This further increases the unemployment rate as companies could no longer stay in business and pay employees.

In 1932, speculators again attempted to exchange paper money for gold. People began to accumulate the yellow metal and the prices continued to rise. To stop the purchase of paper for gold, the president of the United States, Franklin Roosevelt, prohibited individuals from owning gold in any form. Whoever has gold must sell it to the Federal Reserve. In 1934, Congress passed the Gold Reserve Act to become federal law. The law also allows the president to raise the price of an ounce of gold to $35.

In 1937, the United States had $12 billion worth of gold reserves at Fort Knox in Kentucky and at the Federal Reserve Bank of New York. In 1939, the world entered World War II, Roosevelt poured more money into the defence budget, and the economy improved. In 1944, the major economically powerful countries negotiated what was to be known as the Bretton Woods Agreement. This made the US dollar the official world currency. The US defended the price of gold at $ 35 an ounce. But when Nixon came to power, the Fed had to stop respecting the dollar value of gold. Foreign central banks can no longer exchange dollars for US gold. When the United States exited the gold standard in 1976, the price of gold rose to $ 120. Now, without the influence of the dollar and an open market, the value of gold has risen. In 1980, gold traders set the price of gold at $ 594.92. When the inflation ended, the price dropped to $ 410, where it remained until 1996. But over the years, traders revert to gold after each economic crisis. They did so after the terrorist attacks of September 11 and also during the economic crisis of 2008. The price reached an all-time high of $ 1895 (the price of AUD gold would have been $ 2596.80 AUD) on September 5, 2011, when the US was worried about default. It has since declined as the United States grew and inflation remained low. Currently, the gold price AUD is doing well.

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