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A Brief History of Gold Price ‘Spikes’

By Douglas Trinder, Senior Numismatist & Precious Metals Analyst, Jack Hunt Gold & Silver

US CurrencySince President Nixon’s abandonment of the Bretton Woods System in August of 1971 the price of gold in US Dollars has been allowed to fluctuate from its previously set price of $35.00 per troy ounce. Since 1971 there have been both extended periods of gold price stability as well as several instances of rapid price increases or ‘spikes’. This article will examine three of the more noteworthy gold price spikes.

The most highly publicized gold rally occurred in 1979-80. Often referred to as the ‘boom’, gold rose from $230.00 an ounce in January of 1979 to a then staggering level of $855.00 an ounce in January of 1980. With silver reaching its still all-time high of $48.00 an ounce at the same time, media coverage was extensive. Fly-by-night gold and silver buyers suddenly appeared in what seemed to be every vacant storefront. The amount of gold jewelry, sterling and coins sold by the public was at levels never to be seen again. However, the ‘boom’ was short lived and effectively ended in the Summer of 1980. By June of 1982 gold was below $300.00 an ounce again. The gold price spike of 1979-80 is thought by many to be a classic reaction to high interest rate, high inflation rate during the latter stages of the Jimmy Carter presidential tenure. When it became apparent that Ronald Reagan and his conservative fiscal policies would assume the presidency in 1981, inflation fears eased resulting in gold’s price regression.

Gold prices 1971.08.15-2020.09.14

From 1982 to 2006 the price of gold was valued in a rather narrow range of $255.00 to $530.00 an ounce. In 2007 gold began a noteworthy ascent in value hitting $1000.00 an ounce in March of 2008 and breaking the $1000.00 barrier for good in October 2009. In July of 2010, the gold price averaged $1050.00 an ounce, one year later it hit $1600.00 and peaked two months later at $1900.00. This price spike garnered some media attention and many of the fly-by-night ‘We Buy Gold’ businesses, closed since the mid ’80’s, popped up again. This gold price spike, unlike 1980, featured far more bullion transactions and less selling of jewelry and the like. Many of those who had accumulated bullion over the prior 25 years sold some or all of their holdings at a handsome profit. Others, thinking precious metals were heading to even more astronomical heights, bought in at these then relatively high levels. Unfortunately, by 2013 gold had retreated to below $1200.00 and remained rangebound till 2020. Most observers feel gold’s regression from its 2011 highs was likely due to three reasons: 1) Profit taking 2) Lessening of demand due to the then unheard of $1900.00 price level and 3) Low Fed Fund (Interest) rates from 2010 to 2016.

gold coinsThe third and final gold price spike to be discussed is still ongoing. In August of 2019 gold averaged $1400.00 an ounce. Exactly one year later it hit an all-time high of $2065.00 an ounce. As I write this gold seems ‘comfortable’ trading in the $1900.00 range. Unlike the other price spikes of 1980 and 2011, the meteoric rise of gold this year has been largely ignored by the media. Why? Theories are numerous. Is it due to the volume of ‘more important’ legitimate or imagined news we’ve been bombarded with this year? Is the Federal Reserve or Wall Street suppressing information? We may never know.

While the amounts of scrap gold and coin collections sold this year have been minimal, the volume of bullion related transactions has been extraordinary. This year has seen such intense demand for tangible precious metals that shortages in gold and silver bullion have been commonplace.

Where gold goes from here is purely speculative. Interest rates are effectively as low as they can go but the Fed could create more money out of thin air in response to the current pandemic. If that occurs the dollar should theoretically weaken versus foreign currencies, a scenario usually bullish for gold. A Democratic victory in November would likely give at least a temporary boost to the gold price as well. On the other hand, if the pandemic and its related issues ease, or a successful COVID-19 vaccine becomes available to the masses, a regression in the gold price back to pre-COVID levels seems likely.

Regardless if you think gold is rocketing towards $3000.00 an ounce or regressing back to $1500.00, I’d like to conclude by suggesting you talk to the professionals at Jack Hunt Gold and Silver for all of precious metal related transactions.


New Design For 2021 Silver & Gold Eagles

The United States Mint recently announced there will be new reverse designs for the popular Silver and Gold Eagle bullion coins in 2021.

In 2021 both Silver and Gold Eagles will be celebrating their 35th anniversary which is one of the two oft stated reasons for the design change. The second and more likely reason for the design change is to deter the frequent counterfeiting of these coins.

The current Silver Eagle reverse and Gold Eagle

The current Silver Eagle reverse features a heraldic eagle and the Gold Eagle reverse features a nesting eagle. Their reverse designs are essentially the same as the original 1986 issues. Although the specific changes have not been released as of this writing the new design will by law include an Eagle. The revised bullion coins will also have multiple security details to combat counterfeiting. In recent years both Silver and Gold Eagles have been increasingly reproduced illegally, often made of cheap base metals and frequently originating in China. Although easy to detect by experts, these fakes have been widely distributed worldwide to the masses primarily using online selling sites. The U.S. Mint hopes to curb or eliminate this practice with anti-counterfeiting measures.

New Canadian Designs

So, what anti-counterfeiting measures will the U.S. Mint take? Some of the new security revisions will understandably remain secret. The design change is an obvious measure but it?s likely the U.S. Mint will borrow technology from our northern neighbors at the Royal Canadian Mint. The Royal Canadian Mint uses a difficult to detect process known as micro engraving on its popular Silver and Gold Maple Leaf bullion coins. The Royal Canadian Mint also uses highly polished and textured dies making their bullion coins more difficult to replicate. It is probable that these and other unpublicized measures will be incorporated into most higher value U.S. Mint issues in 2021 or soon thereafter, beginning with the highly popular and liquid Silver and Gold Eagle bullion issues.

Jack Hunt Coin Brokers will be amongst the first in the world to offer these new varieties to both collectors and investors alike. Jack Hunt Coin Broker is one of only a few U.S. Mint Authorized Purchasers of Silver and Gold Eagles in the world. For you the consumer, that means any Eagles purchased from Jack Hunt?s came directly from the U.S. Mint?leaving no question as to their authenticity. Please contact us by early January 2021 for specific pricing and availability information.


Two Schools of Thought: COVID 19’s Impact on Gold

The current global Coronavirus pandemic which is only now showing some evidence of winding down has already made an enormous negative impact on the U.S. and global economy. So-called experts are predicting future economic impacts ranging from a short-term recession to a lengthy world-wide depression. Most financial pundits agree that both the equities and bond markets have and will continue to suffer negative long-term effects from this horrific event.

But what about gold? A global pandemic is new territory for the financial markets. We?ve seen how markets historically react to war, terrorism, recessions and bad economic news but a rampant life altering disease is both new and confusing in every aspect. As a result, there are two schools of thought on gold?s value in a COVID-19 world. Not surprisingly one group believes gold will regress in value while the other forecast is for a bull market in the yellow metal. I?ll present some arguments offered by both bulls and bears and let you decide.

The main argument for lower gold prices is that we are inevitably heading towards a lengthy period of deflation. Demand for gold may decline if investors fear deflation and move into nominal fixed payments, like U.S. Treasuries, considered by many a safe-haven investment. With non-existent interest rates and an unstable stock market, the paper asset crowd traditionally flees to cash, in this case U.S. Treasuries. There are those who believe that the U.S. Dollar has already bottomed versus other major currencies and that the Dollar still represents the strongest currency on earth. Considering the historical inverse relationship between gold and the Dollar, those betting on the future of the US currency feel gold will trend lower. During the financial crises of 1987 and 2008 gold prices initially rose but then drifted lower when a return to some semblance of normalcy began. Mainstream financial advisors believe that scenario will again play out over the next several months, time will tell.

However, gold ?bugs? have numerous reasons to think gold will minimally maintain its current levels and quite possibly test new highs. Many believe the Federal Reserve?s and other countries massive stimulus programs (translated: creating money from nothing) will ultimately prove inflationary. Gold usually reacts positively during inflationary periods. Volatile equities markets and non-existent interest rates will make even traditional investors consider gold for their portfolios. If a systematic banking crisis occurs due to the worldwide pandemic, gold is likely to retain its value or appreciate as it?s not part of the traditional fiat currency system. As I write this physical gold and other precious metals are in short supply due to mine and refinery closures. Shortages of tangible metal usually results in higher premiums for the consumer, effectively raising the price of gold ownership by 5% to 10% over the typical nominal premiums.

As mentioned, a global pandemic and its long-term effects are new territory for the world?s financial markets and the global economy. Considering all the current and potential future economic issues, both domestic and world-wide, we believe that precious metals can be a prominent part of a well-diversified portfolio.


What is “real” money?

Throughout recorded history, true money has been defined as a tangible item accepted for exchange and considered to have value.

Diverse items ranging from tulip bulbs to seashells to weaponry have been considered money at some point in history. However, none of those items have stood the test of time.

Neither have government issued fiat currencies. Throughout history all fiat currencies have failed or likely will fail again.

Currencies are not “real” money

If you ask the average guy on the street to define “money,” 99 out of 100 will likely answer “paper money,” the U.S. Dollar or a similar response. Technically, that?s an incorrect answer. Paper money and base metal coinage are just government issued currencies, a form of debt.

On the other hand, gold, and to a lesser extent silver, fit the historical definition of money and have for thousands of years.

So why have gold and silver survived the test of time as a true form of money? And why have gold and silver been universally accepted as money throughout recorded time?

gold bullion vs gold coins

Unlike government-issued currencies, gold and silver have been considered “real money” throughout history. [Photo credit: BullionVault Bullion bar in sea of coin via photopin (license)]

Why gold & silver are “real” money

Here are a few reasons why gold and silver are well suited to be considered money:

1. Gold and silver are LIQUID, meaning they are easily exchanged, traded, bartered with or sold for non-monetary government issued currencies.

2. Gold and silver are CONSISTENT. That refers to the fact that gold and silver are easily recognized, and their appearance and composition have never changed.

3. Gold and silver are DIVISIBLE. Smaller or larger units of precious metals are proportional in value. Most other tangible items of value are not.

4. Gold and silver are CONVENIENT, meaning even small units hold noteworthy value and are easy to carry and transport.

5. Gold and silver are DURABLE. That means, as with all precious metals, they are not biodegradable, nor can they evaporate and disappear without a trace. That is not the case with many forms of “so-called” money.

6. And finally, and maybe most importantly, gold and silver cannot be created “on a whim.” Both are FINITE. Whereas there?s almost an infinite amount of paper on this planet, there?s a very finite amount of accessible precious metals.

If you have any questions about true money, which is by historical definition physical gold and silver, please contact the non-commissioned professionals at Jack Hunt Gold and Silver at your convenience.


An Introduction to Buying Silver 101

This article is a follow-up to our last blog which discussed the merits of owning physical gold. Both novices and long-time investors stand to benefit from a review of the basics of owning physical silver. The following list contains some, but not all, of the reasons to buy tangible silver. Some items on the list hold true for any precious metal, others are unique to silver.

  1. The most obvious reason to own silver is its comparative affordability. As I write this it?s possible to own physical silver for less than $20.00 per troy ounce. As a point of reference, gold is currently 80 times more expensive than silver. We frequently mention to our customers that it?s far more likely for silver to double in value to $37.00 than it would be for gold to double in value to $3000.00 per ounce. Simply put, if your primary motivation for buying precious metals is profit, silver offers you the best opportunity for appreciation.
  2. Silver is more of a commodity than gold. It has numerous practical uses in the fields of technology and medicine amongst others. Whereas virtually all of the gold mined throughout history is above ground and accessible, most of the silver ever mined is gone, much of it inaccessible in landfills, too expensive to recycle. Estimates of the above ground quantities of gold and silver vary wildly but all agree the accessible silver on this planet is far less than the current silver to gold 80:1 price ratio suggests. Based on supply considerations only, gold is either obscenely over valued or silver is grossly undervalued. We tend to believe the latter is true.
  3. If gold, platinum and palladium continue to trend higher many investors will choose to buy silver simply because the other metals are no longer in the average buyer?s budget. This point was touched on in our first pro silver argument. However, in this scenario silver would likely rise due to higher demand. In a precious metals bull market silver could become or already is ?the only affordable game in town? for many precious metal buyers.
  4. Readily available smaller units of silver would be far more useful in an unlikely but possible currency devaluation or financial collapse as well as during, God forbid, a natural disaster or war. Along the same lines, silver?s liquidity during a short-term financial crisis, whether it be unexpected bills or a medical emergency, makes it far more practical than its more expensive counterparts, gold, palladium and platinum.

Jack Hunt Gold and Silver, 2017 1oz US Silver Eagles Coin

There are numerous other reasons to own tangible silver, but many of these reasons apply to all precious metals, not just silver. I?ll review a few of them:

  1. Purchasing and owning tangible silver can be legally anonymous, especially if purchased through Jack Hunt Gold & Silver.
  2. Unlike bank deposits, equities, Treasuries and other paper investments, physical silver cannot default, go broke or file for bankruptcy.
  3. Physical silver is real?it is tangible. Currency, equities, Treasuries, etc., are just paper and promises from the issuer.

In conclusion it should be said that asset diversification is more important than ever in our turbulent and confusing times. We believe that a balanced portfolio should contain some traditional assets such as real estate, equities, bank accounts and cash. However, we strongly believe that a moderate percentage of one?s liquid assets be in precious metals. The non-commissioned professionals at Jack Hunt Gold & Silver would be happy to assist you in any form of precious metal related transactions. 


How the Petro-Yuan Will Impact The U.S. Dollar

This past March, China launched trading of the yuan-denominated crude oil futures contracts. These are the first futures that have been listed on China’s mainland to overseas investors.

Given that China is the largest importer of crude on the planet, Asia Times called the launch of the petro-yuan a ?geoeconomic game-changer.?

But what does this mean for U.S. investors?

For the first time, overseas investors will be able to access a Chinese commodity market. And to start, the U.S. dollar will be accepted for deposit and settlement, while several other currencies will be accepted for deposit only, according to the Times.

Will the Petro-Yuan Kill The Petro-Dollar?

Experts say there?s no reason to think the launch of the petro-yuan will immediately end the dominance of the petro-dollar, according to Pepe Escobar of the Asia Times. He writes that the end of the petro-dollar depends on many variables, with the most important being how China controls the global oil market.

Escobar also explains that one benefit of the petro-yuan for China will be that it will bolster the country?s efforts to invest in Asian and Middle Eastern infrastructure, particularly in Saudi Arabia.