I'm new to the gold thing, anyone know why gold was $20.67 per oz for the time period of 1879-1932?

mrpaseo

Was that the time period that gold was not authorized to be personally owned thus causing no fluxuation in the market?

Thanks,
Ray

nwcs

Gold could be owned as we were on the gold standard. It was market forces that kept the price there. Remember, gold tracks with inflation pretty well. Since the denominations didn't change, inflation was represented in price primarily. After going off the standard and keeping denominations stable, gold would increase independent of denominations. Of course, this is a very simplistic view.

mgoodm3

The price of gold was fixed by the gov. You could buy a $20 gold piece for $20. Just less than an ounce.

mrpaseo

Thanks Peeps, I did a little research on price history of gold and was amazed to see a few details.

1. The long period of no fluxuation
2. The price gold shot up to in 1980
3. It wasn't until 1972 that an oz of gold broke the 100 dollar mark (Closed over 100)

Interesting stuff.

Thanks,
Ray

nwcs

Well, when gold bullion ownership was questionably outlawed by FDR the demand built up till the late 70s when it was legal again to own bullion and the government allowed gold to be priced by the market.

ddink

Relativism.

The government said, in effect, this: "However much an ounce of gold is worth, that's how much $20 is worth." In other words, one dollar was defined as "the value of 1/20th ounce of gold."

MacCrimmon

<< <i>In other words, one dollar was defined as "the value of 1/20th ounce of gold." >>



Of course, now a dollar is but 1/400th per ounce of gold (give or take) ...... makes you kinda feel warm and fuzzy, doesn't it.

mrpaseo

Warm and fuzzy...

Yes, warm and fuzzy good.

me

MrEureka

Pre-1834, 24.75 grains of gold equalled a dollar. At the time, the official gold silver ratio was 15:1. By 1834, silver had fallen in value, gold coins were being forced out of circulation and melted (via Gresham's Law), and the official rate was changed to 16:1. That new gold dollar therefore needed to contain 15/16 of the old 24.75 grain standard, i.e., 23.2 grains. There are 480 grains in a troy ounce. Do the math and you'll find that a 23.2 grain dollar works out to $20.67 per troy ounce.

DaveG

Because the Dollar was defined as a fixed amount of gold OR silver in 1792, there was a fair amount of fluctuation, just not the kind we're used to seeing in recent years.

Instead of the price of gold changing in dollar terms, either gold or silver coins disappeared (were hoarded, exported or melted) as the prices of the metals changed. For example, gold was undervalued in the US prior to 1834, so gold coins disappeared from circulation. When the dollar was defined as a smaller amount of gold in 1834, gold coins reappeared in circulation. When huge amounts of gold were discovered in California in 1849, silver coins increased in value relative to gold and were hoarded until the silver coins were reduced in size in 1853.

When Greenbacks were introduced in the Civil War, they weren't exchangable for gold coins at face value, so a gold market sprang up in New York. You can look at charts that show the gold value of a Greenback (or the "dollar" value of gold) rise or fall along with Union victories or defeats.

Later on, the Sherman Silver Purchase Act of 1890, which obliged the Government to buy silver to be minted into still more unwanted Morgan dollars, created Treasury or Coin notes to be used to pay for the silver. The Treasury Notes were redeemable in either gold or silver, at the discretion of the owner of the Notes. The silver mine owners thus sold silver to the Government and were paid in Treasury Notes, which they redeemed in gold. They sucked so much gold out of the US Treasury, that it helped significantly to create the Panic of 1893 - European creditors saw the Treasury losing so much gold that they were afraid that the US wouldn't have enough gold to pay them, so they started to remove gold as well. (By 1893, the Europeans had demonetized silver, which meant that the US couldn't pay its debts in silver at a fixed price in dollars, but could only sell silver at whatever price the world commodity markets set it at.)

Actually, the official price of gold was $20.67 per troy ounce from 1834 to 1933.

mrpaseo

Amazing guys, thanks, keep the info comming, add what you know everyone, .

Thanks,
Ray

sliderider

See how much the dollar has declined since we went off the gold standard?? You'd be lucky to buy a single FLAKE of gold dust for a dollar these days.

And on a related note, the amount of silver in a silver dollar was also once artificially held to have the same value as the amount of gold in a gold dollar.