Gold: A Historical Footnote

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

When the FDR administration set its price of $36 per oz., it was so attractive that gold poured into the United States from all over the world. A book entitled "Golden Flood" gives the details (book was written decades ago, by an economist named Graham).

Eventually of course the $36 price became ridiculously low, but it didn't start out that way.

-- Peter Errington (petere@ricochet.net), October 07, 1999

Answers

Peter,

Check out the gold price graphs at kitco.com ( especially the one that traces gold prices from the late 1700's or 1800's?). I was amazed that the price of gold remained relatively the same up until the 1970's. Can anyone explain why?

-- TM (mercier7 is scr@tching his head.compdnt.com), October 07, 1999.


1833-Present Gold Price Graph

-- TM (
mercier7@ is still scr@tching.com), October 07, 1999.

Let me try again.

1833-Present Gold Price Graph

-- TM (mercier7@pdnt.com), October 07, 1999.


Why was the "gold price" almost constant for hundreds of years? Because it was money. What is the price of money? 1 oz. = 1 oz. Only when politicians and bankers conspire to take away gold and substitute paper can gold have a "price".

-- Steve Heller (stheller@koyote.com), October 07, 1999.

Peter, are you saying that when the govt. confiscated gold they bought it back at a price that was attractive at the time?

-- Shelia (Shelia@active-stream.com), October 07, 1999.


The gold graph is taken from the London # fix (ie - the British pound was a fixed amount of gold) then transitions to the American $ fix of $20.67 per troy ounce established by Congress in the later 1800's (we used silver for dollars before this).

Gold was withdrawn from circulation as money by FDR in 1933. A year or so later the price was revised to $35 per troy ounce. Until 1971 gold and the US $ were in a fixed relationship of $35 to the troy ounce (but it was illegal for Americans to own gold as a monetary asset). Nixon cut the last link of the US $ to gold in 1971. The gold price in US $'s from that point on was 'floating' and revalued to approximately $400 per troy ounce by the mid 1980's. It has waffled about that point since then until the beginning of 1997 when it began a relentless fall culminating in $248 per ounce.

The price action in gold over the past 2 years has been dominated by the forward and futures markets. Central Banks leased gold to bullion banks who leased the gold to mines and hedge funds. This has been know as 'the gold carry trade'. Presently the price rise from $256 to $336 has been due to a sudden and very public repudiation of leasing by the European Central Banks.

The estimated 'short' (leased) position in physical bullion has been estimated at between 4,000 and 12,000 metric tonnes. The current market is in the very begining of the first step in covering those physical tonnes of gold.

As they say in show business, 'We've got a reeallyyy goood shewww for you tonight folks.' (said while rubbing hands together a la Ed Sullivan).

-- ..- (dit@dot.dash), October 07, 1999.


TM: Look at it this way. 200 years ago you could buy a loaf of bread with one US silver dime. You still can, but it will take 10 or 15 of the current US dimes.

-- a (a@a.a), October 07, 1999.

Shelia, that is precisely what I am saying. Otherwise there wouldn't have been a golden flood into this country. I realize that this doesn't sit well with a lot of people's theories.

-- Peter Errington (petere@ricochet.net), October 07, 1999.

Whoops, Peter, I thought the gold price was $20.67 when it was confiscated, and then -- after confiscation -- the govt. raised the parity to $35? This had the effect of giving them instant profit on all the gold they'd paid less than $21 for a short time before.

-- de (delewis@XOUTinetone.net), October 07, 1999.

Well, de, if you're right, then I've been wrong as hell.

-- Peter Errington (petere@ricochet.net), October 07, 1999.


de is right, the re-valuation came after the confiscation.

-- Pinkrock (aphotonboy@aol.com), October 08, 1999.

Moderation questions? read the FAQ