As I sit down with “pen” in hand to write our blog, it occurred to me that I have to address GOLD, as it recently had its largest one day price drop in 33 years. That is a fairly big event.
Let’s start with a historical perspective; the Romans, ancient Egyptians and just about every other ancient culture, thought GOLD was a valuable commodity. It was equated with gods and rulers, and it represented beauty and power. Homer, in the Illiad and Odyssey, makes mention of GOLD as the glory of the immortals and a sign of wealth among ordinary humans. During this time in history, GOLD had no value but was just considered a valuable commodity.
GOLD was a natural trading tool. It was easy to melt and form, its scarcity and beauty made it desired and worth trading other commodities for. Money was born…in the form of GOLD.
A brief look at recent price history, starting in 1850, shows that the price of gold, per troy ounce, had relatively no change for over 100 years. It was only after 1968, due to changes in pricing structure, that GOLD became free to fluctuate…and it did.
So, what is it worth? In 1980, gold was around $600 per ounce, only to retreat in price for the next 27 years. Then in 2001, the price of gold began a bull market climb that culminated in a price just above $1900 per ounce.
Other than the headlines in the newspapers, did any of this price fluctuations change our buying habits? Did you buy more or less jewelry as a result? Hoard more or less bullion?
For perspective, in 1984, Apple stock (AAPL) had a share price of $26. On January 2, 2000, it had climbed to just north of $110 per share, hitting a high of just over $700 on September 18, 2012. With Apple, an investor can evaluate quantifiable things like company products, management and cash-flow to estimate investment potential. With GOLD…well, there aren’t these things to evaluate.
So, as the debate rages, over whether GOLD is entering a bear market, or pausing before its next run in a continued bull market, leave the emotions behind and ground your investment decision in basic economic factors. Maybe the answers to these questions will be a start:
- Is the potential for rising interest rates positive/negative for GOLD?
- How will global growth impact the price of GOLD?
- How will a strengthening or weakening US dollar effect the price of GOLD?
- Does industrial growth matter
As always, I welcome open dialog on this or any other topics.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.