(13 July 2021) In 1971, to prevent inflation-induced outflow of gold from the country, US President Richard Nixon ended the convertibility of US dollars to gold at a fixed exchange rate. This decision, which was followed by similar measures in other countries, ended the post-World War II period during which the value of national currencies remained unchanged relative to the value of gold. The decades of post-Gold Standard history show that none of major fiat currencies have been able to maintain their purchasing power against gold in the long run.

  • The major currencies lost from 78% (Swiss franc, Japanese yen) to 98% (Indian rupee, Indonesian rupiah) of their value relative to gold between 1979 and 2021. Limited supply of gold, and the further constraint of the slow growth of gold mine production, protect gold from inflation, as opposed to the often emission-based increase in the paper money supply.
  • In recession and recovery periods, gold outperforms not only individual currencies but also other asset prices. For example, during the great recession and recovery (a period between Q1 2008 and Q1 2010 which saw the decline and recovery of global GDP), the price of gold increased 35% compared to its pre-crisis level in Q4 2007. Prices for other assets — stocks, homes, and commodities — declined by 29%, 12% and 7% respectively.  The same pattern has repeated during the COVID crisis: by Q1 2021* gold gained 26% compared to Q4 2019, outperforming other assets.

*the most recent period for which data is available for all asset categories. Global GDP is expected to recover to Q4 2019 level in Q2-Q3 2021.

Note: Aggregate asset prices shown below are the GDP weighted averages of asset benchmark indices for UK, Germany, France, Japan, and the US. Asset price indices for individual countries other than the US were converted to equivalent US dollars for the purpose of comparison.

Verwandte Insights von Knoema

Knoema | Gold Standard 2.0 Readiness Index

(9 October 2020) During periods of high volatility (hello, coronavirus!) governments, investors, businesses, and households alike typically seek out safe assets to protect their savings. In the absence of a magical currency impervious to the volatility of recessions, the search for stability usual returns to none other than the modern day gold standard. For governments, especially in the period since the Great Recession, this translates into more aggressive and intentional accumulation of gold within their international reserves. Setting aside the economic implications of a new...

Gold Price History

The price of gold is determined worldwide on the basis of the London Gold fixing price. The price is set per troy ounce of pure gold in the form of standardized bullions. Then, using this price as a reference, producers, dealers and other market participants set prices for jewelry, coins and other goods made of or with gold. On this interactive dashboard you can explore more than 30 years of monthly gold price history and yearly price returns quoted in 19 various currencies of the primary gold-producing and gold-consuming countries. Please note that local currency prices...

Gold Futures Suffer as Russia Approves COVID-19 Vaccine

(25 August 2020) The relentless rally in gold prices finally come to halt as Russia announced on 11 August the launch of the world's first COVID-19 vaccine and created space for hope that an accelerated economic recovery could be on the horizon. Despite skepticism that seems to be prevailing among the health experts around the world (given that the rush to bring a market vaccine precluded the typical full cycle of trials), the news had a bearish affect on gold futures, pushing prices as low as $1,946 per ounce on 11 August from $2,039 per ounce one day earlier. Gold futures have...

Cryptocurrency: "The Digital Tulip"?

(22 February 2021) During the last five months, the price of Bitcoin increased more than five times - from $10,000 to over $50,000 while the global cryptocurrency market capitalization topped $1.7 trillion. When it comes to traditional assets, such a rapid rise in the value of an asset typically indicates the emergence of a financial bubble. But, what about cryptocurrencies? Against the tsunami of cryptocurrencies' market capitalization increase, financial bubbles of the past look like small and mid-size waves, historically adding 40 to 440 percent to the asset value. The value of...