Golden Bulls: Visualizing the Price of Gold from 1915-2020
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Golden Bulls: Visualizing the Price of Gold from 1915-2020

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Sprott

Golden Bulls: Visualizing the Price of Gold from 1915-2020

Some people view gold as a relic, a thing of kings, pirates, and myth. It does not produce income, sits in vaults, and adorns the necks and wrists of the wealthy.

But this too is just myth.

In fact, as a financial asset, gold’s value has shone over time with periods of exceptional performance, one of which may be occurring now.

Today’s infographic comes to us from Sprott Physical Gold Trust and outlines the history of the price of gold from 1915 to 2020 and three bull markets or “Golden bulls” since 1969, using monthly data from the London Bullion Market Association.

But first a little history…

The Gold Standard

*All figures are in USD

During the early days of the American Republic, the U.S. used the British gold standard to set the price of its currency. In 1791, it established the price of gold at $19.75 per ounce but also allowed redemption in silver. In 1834, it raised the price of gold to $20.67 per ounce. The price of gold would retain a nominal value through depressions, civil wars, and wars.

However, $20 today is not the same as $20 in the past. The U.S. dollar may have been convertible at a set price, but the amount of goods that it could buy varies year to year based on inflation. So for example from 1934 to 1938, one ounce of gold would cost $34, but $34 today would purchase a small fraction of an ounce of gold.

While the price of gold may appear cheap in the past, adjusted for inflation it is not as low as you would think. Governments would set the price of its currency against an asset to ensure the stability of prices, however if there would be too many claims against the underlying asset, that asset would run out and the currency would become worthless.

This threat would force the hands of governments to change the standards, as currency became more common and gold reserves more scarce.

An Era of Government Intervention

In the wake of the 1929 stock market crash, investors started redeeming U.S. dollars for its equivalent value in gold, removing currency from the economy. In order to stem the flow of funds into gold and the depletion of government gold reserves, in 1933, President Franklin D. Roosevelt limited the private ownership of gold to discourage hoarding and encourage investing. In 1934, Congress passed the Gold Reserve Act which prohibited the private ownership of gold and nominally raised the price of gold to $35 per ounce.

In 1944, the victorious Allied powers negotiated the Bretton Woods Agreement, making the U.S. dollar the official global reserve currency. The United States ensured an ounce of gold would be worth $35 in its currency⁠—at least until the onset of a stagnant economy in the early Seventies led to the official end of any real gold standard.

Golden Bull #1: December 1969 – January 1980

In 1969, the U.S. gold standard had risen to $42 per ounce in nominal terms, however a period of economic volatility would challenge and change U.S. monetary policy.

On August 15, 1971, President Richard Nixon mandated the Federal Reserve to stop honoring the U.S. dollar’s value in gold at a fixed value, abandoning the gold standard. In 1974, President Gerald Ford would once again allow the private ownership of gold bullion. Energy crises, soaring inflation, and high unemployment stagnated the economy.

By January 1980, the price of gold reached $2,234 per ounce in today’s dollars amidst an environment of double-digit inflation. Federal Reserve chairman Paul Volcker fought this inflation with double-digit interest rates which in turn slowed the economy, causing a recession.

The interest-rate-induced recession would herald in a new global economic boom that defined the Eighties and Nineties. The price of gold dropped to $753.96 per ounce by June 1985, as the economy improved.

From December 1969 to January 1980, gold rose from $285 to $2,234 per ounce, an increase of 684% over 122 months, in inflation-adjusted terms.

Golden Bull #2: August 1999 – August 2011

Expanding household incomes and ever declining interest rates under Federal Reserve chairman Greenspan pushed gold further down to a low of $377.44 per ounce by the end of April 2001.

Loose monetary policy and a reduced tax on capital gains spurred speculative investments into the new internet economy through a growing retail brokerage market and the emergence of venture capital. The tech bubble would eventually pop as these companies were unable to build sustainable businesses and investor money dried up.

Over the year of 2000, investors rushed to exit their speculative tech investments resulting in several market crashes. Then in September 2001, 9/11 happened, marking the beginning of a new era. Gold steadily rose during this period.

In 2008, the Global Financial Crisis shook financial markets and left a recession. Policy makers and central bankers embarked on a controversial policy of quantitative easing to support financial markets. The price of one ounce of gold reached new highs by the end of August 2011, as worries on debt levels mounted for the U.S. and other countries.

From August 1999 to August 2011, gold rose from $394 to $2,066 per ounce, an increase of 425% over 145 months, in inflation-adjusted terms.

Golden Bull #3?: November 2015 – May 2020

In the aftermath of the GFC, the Federal Reserve stoked an economic recovery with cheap money, seeing gold track to a low of $1,050 per ounce by December 2015. It was not until the election of a peculiar American president in 2016 that gold would rise again.

Pressure to increase interest rates, an aging debt-fueled economic recovery, a trade war with China, and the recent COVID-19 crisis has once again provoked economic uncertainty and a renewed interest in gold. With interest rates already at historic lows and quantitative easing as standard operating procedure, global economies are entering unprecedented territory.

There is still little insight into the direction of the economy but since November 2015 to May 2020, the price of gold has risen from $1,146 to $1,726 per ounce, 55% over 55 months.

Gold Going Forward

In an era of tech startups, ETFs, and algorithmic trading, many people consider gold to be a shiny paperweight—however, its performance over time against other assets shows it is far from this.

In 1915, an ounce of gold was worth $488.66 per ounce in today’s dollars and as of May 15, 2020, $1,751 per ounce. Gold has proven its value over time as companies, countries, and governments come and go.

“Golden Bulls” are no periods for idle idol worship. Gold will always be gold, in myth and in fact.

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Mining

Visualizing the New Era of Gold Mining

This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.

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The following content is sponsored by NOVAGOLD
gold mining

Visualizing the New Era of Gold Mining

Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010. 

The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply. 

This infographic sponsored by Novagold highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.

The Current State of Gold Production

Between 2010 and 2021, gold production increased steadily until 2018, before leveling and falling.

YearGold Production, tonnesYoY % Change
20102,560-
20112,6603.9%
20122,6901.1%
20132,8004.1%
20142,9906.8%
20153,1003.7%
20163,1100.3%
20173,2303.9%
20183,3002.2%
20193,3000.0%
20203,030-8.2%
20213,000-1.0%

Along with a small decrease in gold production from 2020 levels, there were no new major gold discoveries in 2021. Meanwhile, annual demand for the yellow metal increased by 10%, up from 3,651 tonnes to 4,020 tonnes

The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future. 

Sustaining Supply: Gold For the Future

Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.

From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies. 

As of 2021, seven of the top 10 mining jurisdictions for investment were located in North America, according to the Fraser Institute. Here’s a look at the top five gold-focused development projects in the region, based on measured and indicated (M&I) gold resources: 

ProjectM&I Gold Resource, million ounces*Grade (grams/tonne)Location
KSM88.4Moz0.51g/tBritish Columbia 🇨🇦
Donlin Gold**39.0Moz2.24g/tAlaska 🇺🇸
Livengood13.6Moz0.60g/tAlaska 🇺🇸
Côté Gold13.6Moz0.96g/tOntario 🇨🇦
Blackwater11.7Moz0.61g/tBritish Columbia 🇨🇦

*Inclusive of mineral reserves. **See cautionary statement regarding Donlin Gold’s mineral reserves and resources.

Located in Alaska, one of the world’s safest mining jurisdictions, Novagold’s Donlin Gold project has the highest average grade of gold among these major projects. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.03g/t. 

Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves. 

Novagold is focused on the Donlin Gold project in equal partnership with Barrick Gold. Click here to learn more now

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