Gold Value in 1980

Woodwind

A question for some of you old guys.

Why did the value of gold shoot up so high in late 1979 and 1980? Were there global concerns? Was it just a fad? In all my reading I don't think I've ever heard a good explanation.

As always I look forward to your input.

WACoinGuy

I thought it was related to a pair of brothers that were cornering the silver market (shooting silver up to $35 an ounce). I remember those high prices because that's when I started collecting. I have several common date silver coins from the 1950s that I paid $5 or more for.

wayneme

the hunt brothers ran the silver up inflation ran the gold

wayneme

i remember 16% bank interest rates on cd

dwood

Wasn't the concern over oil also a determining factor?
And when were Kreugerands outlawed? That seemed to really kick the price up (or maybe it was just coincidental timing?)

I was 18, so I wasn't too concerned about economic issues...as long as I had enough money to take Lisa Rueve to the movies and the cutout

jom

<< <i>brothers that were cornering the silver market >>



For anyone who cares that would be the Hunt Brothers. Lamar Hunt was (or still is???) the owner of the Kansas City Chiefs. He was instumental in starting the old AFL (owned the original Dallas Texans and later moved to KC). He is now a member of the Pro Football Hall of Fame. So....there ya go.

jom

Lakesammman

Couple of years ago I heard a great quote at a investment seminar. Someone asked why they needed a investment advisor. A older man got up and said, "I can answer that for you....I need one because I bought gold at $900".

I had a friend that did the same with some company pension/profit sharing money in 1980 - lost 2/3rds of it for the company.

Higashiyama

The run-up in gold price in 1979/80 can be thought of as the culmination of 15 + years of growing uncertainty about government and our economy. During the 1960s, coinciding with the Vietnam War and Great Society, inflation picked up from the very low levels experienced during the Eisenhower years. Inflation gradually rose in the late 1960s and early 1970s - 4, 5, 6 % -- and confidence in government was impaired by Watergate, Nixon's resignation, and the fall of Saigon. Under Ford and Carter, the talk was of "stagflation" -- inflation in the high single digits or even double digits, accompanied by weak economic growth, increasing unemployement, and Jimmy Carter's apt but unpopular description -- "economic malaise". Add uncertainty in the Middle East, oil embargos, and long lines at the as pumps. The equity markets had been basically flat for 10 years, and there was a growing belief that tangible assets provided the only true protection against inflation. Gold, not available in bullion form to American investors, was legalized (12/31/1973?). Funds flowed into gold, and towards the end, the price was jumping 20, 30, 40 dollars per day.

Ultimately, the combined effect of (1) Paul Volker crushing inflation with high interest rates, (2) Ronald Reagan rekindling confidence in America, (3) deregulation (promoted, actually, by Carter), and (4) globalization sent gold into a long and deep decline.