How high is the sky? Or, where does the sky end? Those are both questions every child has posed or pondered pretty much forever. Each is vexing considering they are essentially unanswerable, even for adults. Doesn’t matter. Kids will continue to ask.
Similarly, how high will gold prices go? That too is an enigma. Naturally, collectors and investors are more than eager to know. For hundreds of years, that price was set by individuals and governments....
When the US was founded in the late 1700s, the price of gold was $19.75 per ounce. That value had been set in 1717 in England by Sir Isaac Newton. Newton was the Master of the Royal Mint and an expert in metallurgy. Consequently, he got the nod to be the world’s “gold god.”
Newton’s price lasted until 1834 when the US Government bumped it to $20.67 an ounce. That was the era for the genesis of US gold coins leading to the coveted $20 gold piece. The $20 “double-eagle” has since become one of the most sought-after coins in global history and remains so.
It took another century before gold jumped to $35 an ounce in 1934. The problem was, US citizens were prohibited from owning it thanks to a 1933 order by President Roosevelt to prevent gold hoarding and creating another Great Depression. (Some gold jewelry was exempt from the order. Collectors were also permitted to own numismatic gold coins. Not surprisingly, almost overnight, many people declared they were coin collectors assuring they could own the precious metal.) The price remained $35 until 1972 when it was bumped to $38 an ounce and then $42 in 1974.
It was in 1974 that then-President Gerald Ford finally repealed the order prohibiting US gold ownership. US citizens were again legally allowed to own it in any form or amount without restrictions. Eager buyers flooded in. The pricing gloves were off.
A mere six years later, in 1980, gold catapulted to $850 an ounce. It bounced up and down and even languished for a while. Then, in 2011, it began its climb to just over $1,900 per ounce. Four years ago, in 2020, it had inched its way up to $2,000. Since then, it has soared over 37 percent. As of this writing, gold has again headed north of $2,700 per ounce.
This all may seem to be good news for collectors and investors. Maybe. But, no matter what, there always seem to be consequences.
Certainly, those wishing to own gold will need to pay much more for it. I suppose that follows the price of most everything during the recent inflation run up. It will also affect the price of all gold, be it in the form of wedding rings, bracelets or simple necklaces.
On a more day-to-day level, gold has been a critical component in the circuitry of everything from computers and televisions to smartphones and even fire/smoke detectors. As the price of gold rises, we can surely expect the price for those to climb as well.
It also raises the specter of increased crime. If a simple gold ring or watch is now valued in the $500 or $1,000 range, personal security becomes a notable issue – here and abroad. As I’ve written before, in India, many people, including the poor, traditionally and abundantly wear gold jewelry in whatever amount they can afford. They are sure to be targets for bad guys.
As impossible as it is to predict future prices, there will be many who may fear they are missing out. They will be compelled to buy. A one-ounce gold coin selling for almost $3,000 will be out-of-the-reach of many. Fortunately, there are many smaller, more affordable options.
At many reputable coin dealers, Mexican gold coins as small as two-pesos weighing just .0482 ounces currently cost about $115. A Canadian Maple Leaf weighing 1/20 of an ounce is now selling for $120. The slightly larger but also affordable 1/10-ounce Chinese Panda runs $260. The popular American Eagle gold coins are also available in fractional sizes.
Considering upwards of 3,000 tonnes (6.6 million pounds) of gold is mined worldwide annually, it doesn’t appear the supply will run out anytime soon. However, considering the world’s two biggest producers of gold are China and Russia who will surely be enriched by rising prices, during this election year, I’m amazed that fact hasn’t been used by a candidate. After all, the sky’s the limit.
For more collecting information and advice, log on to: http://prexford.com/.