Gold Reaches new Heights, Surpassing 1980 Peak After 45 Years
Gold prices experienced a notable surge in September, climbing approximately 5% and reaching a record high of $3,674.27 per ounce on Tuesday. This rally marks the first time gold has surpassed its previous peak set on January 21, 1980, when it reached $850 per ounce.
Adjusting for inflation,that 1980 high equates to roughly $3,590 today. Analysts agree that gold has now definitively exceeded even this inflation-adjusted level, reinforcing its traditional role as a hedge against inflation and currency devaluation.
“Gold is a unique means of playing this role for centuries, if not millennia,” stated Robert Mullin, a portfolio manager at Marathon resource advisors.”Trusts are entering a period where they are rightly concerned about both budget deficits and central banks’ anti-inflationary commitment.”
Year-to-date, gold’s value has increased by nearly 40%, coinciding with President Trump’s tax cuts, the escalation of global trade tensions, and attempts to influence the Federal Reserve. This period has also seen a decline in appetite for US assets, evidenced by sales of the dollar and long-term US government bonds.
the 1980 price spike occurred during a period of US economic turmoil, including a currency crisis, peak inflation, and an unfolding recession.The price doubled in two months following President Jimmy Carter’s freeze of Iranian assets in response to the hostage crisis in tehran, prompting some foreign central banks to reassess the risk of holding dollar-denominated assets.
Carmen reinhart, former leader and senior economist of the World Bank Group, explained, “Gold just reflects the renewed awareness that inflation can be a problem and a problem, as well as the uncertainty about the world. The golden inflationary role of gold in the 1970s and 80s was the key to popularity, but it played an significant role in the 1980s during the uncertainty.”
While the current price increase is substantial, it is indeed less volatile than the rapid ascent and subsequent collapse seen in 1980. This is attributed to increased market liquidity and broader investor access.
The rising price has also led to a significant increase in the value of gold held in reserve.Last month, gold held in London Trezors surpassed $1 trillion for the first time, exceeding the euro to become the second largest asset in global central bank reserves.
Despite being considered “dazzlingly expensive” compared to ancient standards, Grant Sporre, Bloomberg Intelligence Global Metal and Mining Manager, notes that gold remains relatively inexpensive compared to US equities. He suggests prices could climb further if stock markets experience turbulence, stating, “The market is willing to pay the price to obtain security.”
Source of cover image: Shutterstock
Disclaimer: This article does not qualify as investment advice or investment suggestion. Detailed legal data
