Value of Gold Over the Ages

In the Middle Ages, gold was priced at an inflation-adjusted $3,000 an ounce, versus today's $850. With that in mind, here's a graph of gold prices over the intervening period.

I'm a sucker for this sort of graphical info-porn, not to mention being fascinated by our never-ending socioeconomic fascination with gold, even if I don't necessarily buy the gold-bug thesis:

click to enlarge

Comments

[robert99:]

Interesting, but what is your source for this chart?

2008 Jan 07 09:18 AM

[The Silver ...:]

I think it was on the Daily Telegraph on a recent GATA email. Don't know where they got it from.

2008 Jan 07 10:31 AM

[David Lentz:]

And how do they manage to value gold in US dollars long before there ever was a US dollar? That can't be particularly accurate.

But all that aside, this ought to strike a shiver of fear into the hearts of the gold bugs, when the ONLY time that gold has proven to be a sound choice over the entire history of the US dollar was in the late 1970s spike when inflation showed signs of turning into hyperinflation.

Given that there is a substantial ongoing debate about whether we face inflation or deflation, if it comes down on th eside of deflation -- well, just look at the performance of gold during our last deflation in the Great Depression. Not a pretty picture for someone with a major position in gold.

(for the record, I have about a 15% position in gold, mainly because I am not yet sure which way the inflation/deflation argument will be resolved -- and I'm nervous as hell about it)

2008 Jan 07 10:38 AM

[The Silver ...:]

"Just look at the performance of gold during our last deflation in the Great Depression"

Gold did nothing until 1933 - it was fixed by government decree at $20 per ounce. Roosevelt then inflated the money supply and gold was refixed to $35 in a day! Pity no one could profit from it since he simultaneously banned private ownership of gold.

2008 Jan 07 11:32 AM

[EE:]

Why is everyone fixed on gold when all the gold ever mined still exists ? Silver is the poor mans gold but since it is used up in many industrial processes and governments have long since sold away their stockpiles it is just a matter of time before Silver is recognized as much rarer than gold, is short in supply, industry must have it, and the manipulative shorts have to cover. The silver gold ratio could be drastically reduced in a few years or less. maybe 10/1 or even if gold drops to 400 as Silver out performs.

2008 Jan 07 12:11 PM

[Freemarketman:]

I only view gold as a store to protect my purchasing power. As gold moves up, so fiat moves down. If left alone to the market (including the manipulation which can not be sustained) the price will reflect the correct price level.

BTW, did anyone notice that the price of oil priced in gold, has remained relatively unchanged. Interesting :-)

2008 Jan 07 01:37 PM

[Hugh:]

I would like to see the world's population plugged into the figures.

2008 Jan 07 02:49 PM

[Reinhard:]

What's mostly wrong with this graph, IMHO, is the "adjusted for inflation" part, since they most likely use a CPI (consumer price index). First, the CPI is always understated by governments having an agenda (so they can pay out smaller entitlement payments). Second, even if it was right, it is not the correct measure of adjusting for the price of gold, since gold is a hard asset, while consumer products get cheaper due to efficiency of production.
The right measure is the money-supply which measures the rate of creation of money and credit. This is the rate at which money loses its value compared to something that isn't much created or destroyed (gold). This would tilt the above graph downwards and make gold cheaper than it looks. Why should gold have a value at all? It has a utility as medium of exchange and storage of wealth, and is probably worth a certain proportion of our total wealth, depending on how much we trust other investments and paper money. If paper money is created at a rate of 7%, the interest rates should be at least 7%. At 10%, one can still stay ahead of the devaluation. If interest rates are only 5%, paper money loses its relevance as an investment, and people will wake up and rather hold gold. This is why gold fluctuates and doesn't go exactly inversely to the money-supply.

2008 Jan 07 07:50 PM

[jock:]

Avg price 1801 to now is said to be $850, but the chart is mostly WAY below that price. Something wrong with this chart!

2008 Jan 08 12:39 AM