Did you know that downtown San Francisco is built atop a veritable graveyard of abandoned, buried ships? The aftermath of a craze for wealth like none other, the “California Gold Rush” of 1849.
Prospectors traveled the world over to try their luck panning for gold in the “Bear Flag Republic.”
According to legend, some jumped from the ships as they pulled into the San Francisco Bay. Swimming ashore as rapidly as possible to get a headstart at quenching the precious metal fever. The lure of Sutter’s Mill and the promise of glittering gold in the Coloma’s American River was too great a temptation.
Of course, the human preoccupation with gold persists to this day. We perceive it as a mark of affluence and a hedge against inflation. But what is the value of gold today? Keep reading as we explore this precious metal’s past, present, and how it may fit into your financial future.
Lost in Time: The Discovery of Gold
How did humans first discover gold? The cultural memory remains buried in the recesses of time. Perhaps in some prehistoric village thousands of years ago, a child came clamoring back to his parents, holding a shiny rock from the creek in his hand.
We can only imagine how the human love affair with gold began in earnest. But we do know that it has been a long and rich one. Because gold shows up in diverse geographic locations, gold fever has spared few cultures.
As humans collected more shiny nuggets, they found many reasons to appreciate it. Besides its stunning appearance, it proved easy to work. In fact, gold remains the easiest of the metals to manipulate. In nature, it often occurs in a pure and workable state, which also contributed to its charm.
Over time, the human relationship with gold evolved. It became increasingly powerful in the eyes of those who searched for it and worked it. It also became synonymous with great leaders and even the gods and goddesses.
A Symbol of Affluence and Immortality
Over the centuries, gold became a prerequisite for immortality and affluence. Cultures the world over prized it and fought for it.
Idols and shrines of gold appeared. The archaeological record contains countless plates, vases, cups, and vessels fashioned from the stuff. And, of course, coins and personal adornments followed.
Among the most famous archaeological finds? The so-called “Gold of Troy” recovered in Hisarlik, an ancient site near present-day Istanbul, Turkey. Dating to the era of 2450 to 2600 BC, its discovery set Europeans’ imaginations on fire.
The goldwork itself proved both delicate and ornate. The range of artifacts proved intriguing, from delicate jewelry to gravy boats weighing a full troy pound. It’s little wonder the site of Hisarlik also contained evidence of siege and warfare.
To fuel the ancients’ thirst for this precious metal, slaves and prisoners of war were sent into ancient mines. There, they trudged up the precious commodity for countless past cultures, from the Phoenicians to the Hittites, the Indians to the Chinese.
The intrinsic appeal of gold was and remains integral to its value. Some things never change. As barter arrangements gave way to gold and silver coins, the wealth of leaders and nations rose.
From the Old to the New World
By 550 BC, the Greeks mined for gold throughout the Middle East and parts of the Meditteranean. Plato and Aristotle opined about its qualities and origins in their writings, believing it to be a dense combination of sunlight and water.
In ancient Egypt, they mined and worked gold as far back as 3100 BC, as evidenced in artifacts dating to the first dynasty. By 1320 BC, the first treasure map was forged on papyrus, setting human hearts on fire with dreams of hidden wealth.
By 2600 BC, the Mesopotamians crafted fine gold jewelry for various decorative purposes. They adorned both humans and buildings with the glittering metal, an emblem of their great affluence, sophistication, and despotic conquest of neighbor nations.
Of course, what we know of Egyptian gold smithing came from a slightly later age through the perfectly preserved tomb of the “boy king,” Tutankhamun. The shining gold visage of his sarcophagus inspired its discoverers and steeped them in the “curse of the pharaohs.”
An ocean away, the Incas referred to gold as “tears of the Sun.” The myth of Inca gold exists to this day, buried in the mist-veiled mountains of central Ecuador.
Many remain tantalized by the notion a treasure trove lays hidden in the isolated Llanganates mountain range, sandwiched between the Andes and Amazon. Known as Atahualpa’s gold, the Inca hid it from the Spanish conquistadors who subjugated them.
What Is the Value of Gold?
In the past, gold was sought-after as a wealth maker, a mark of affluence declared through coins pressed with rulers’ silhouettes and intricate jewelry. Today, its value stretches far beyond wealth attainment and declaration.
It’s used in the manufacturing of certain medical devices and electronics. And as we’ve already mentioned, many investors rely on it to diversify their portfolios and hedge against inflation.
What’s the current value of gold at the moment? As of August 2020, it came in at $2,000 per ounce. That’s a massive gain from $100 per ounce seen just 50 years earlier.
Why and how do gold valuations chance so significantly over time? A variety of factors come into play. Like most commodities, supply and demand certainly play a role in the price of this precious metal.
But gold retains value apart from the whims of the market. Sources of demand for gold include central banks and government vaults. Investment in large ETFs represent another factor that can make this shiny yellow metal’s price skyrocket.
In other words, this moment marks a “perfect storm” for inflated gold prices, but don’t expect this to last forever.
Now’s the perfect time to find out more about the latest values for this commodity. You should also ask, “How to sell my gold?” After all, we’ve seen this precious metal decline in price before.
Keep reading to find out why time is often of the essence when it comes to capitalizing on gold prices.
A Hedge Against Inflation
What makes gold such a fantastic hedge against inflation? For starters, its value sometimes moves opposite of the US dollar. Why? Because the metal is dollar-denominated.
What’s more, fresh supplies of gold are primarily driven by mining operations. These have dropped off since 2016, resulting in limited supply for greater demand.
Let’s explore the role of central banks in all of this for a moment. Central banks hold in reserve both gold and paper currencies. As these banks diversify their monetary reserves, they exchange paper currency for gold.
As a result, demand increases, and the price of gold rises. Since the vast majority of nations worldwide sustain gold reserves, demand remains somewhat consistent.
We are living through somewhat unprecedented times, which has further impacted this general trend. Bloomberg confirms that central banks worldwide have been purchasing more gold in recent years than they did when the US dropped the gold standard in 1971.
Which nation represents the biggest buyer? Russia. After the former Soviet Union, the nations most zealous for gold include Turkey and Kazakhstan.
How much have they been buying? In 2018, they bought a total of 651 tonnes.
The American Economy and the Value of the Dollar
As we’ve already mentioned, gold is money-denominated. This generally results in an inverse relationship between their values.
As a result, when the US dollar proves robust, the price stays more controlled and depressed. But when America’s currency takes a nosedive, then gold’s value increases.
Why? Because more gold can be purchased for fewer dollars, and therefore, demand surges. NO wonder investors have long touted the yellow stuff’s value as an inflation hedge.
When inflation prices jump, so do those of gold. But as the current economic recovery continues, gold prices will likely drop again.
Other Areas of Gold Demand
Looking back to 2019, jewelry comprised about 50 percent of gold demand. This equated to approximately 4,400 tonnes. The countries that consumed the greatest amount of gold via jewelry were India, China, and the US.
Besides jewelry, another 7.5 percent of the gold market went to technology. Gold remains a key component in the manufacturing of medical devices such as stents. It also has applications in the manufacture of precision electronics such as GPS units.
There’s been significant demand for gold in recent years between central banks, jewelers, and big tech. No wonder gold costs have risen so substantially over the past five decades.
Where Does Gold Originate?
We all know that gold is obtained through mining activities. As the 49ers we discussed at the beginning of this article learned, gold panning is often the least efficient way to find it. Today’s gold mining operations are massive, and they prove expensive.
Major players in worldwide mining of the precious metal include:
- South Africa
- China
- The United States
- Russia
- Australia
- Peru
Gold mining operations directly impact commodity prices due to the ever-changing balance of supply and demand. In 2018, the gold produced from mining came in at 3,260 tonnes. That’s an increase of 760 tonnes over 2010.
Gold Production Over the Past Decade
Despite this slight uptick over the past decade, gold mining production hasn’t changed appreciably since 2016.
Why? Because all of the globe’s “easy gold” has already been accessed. Now, miners must go to extraordinary lengths to enjoy worthwhile yields. That means digging deeper to access high-quality gold reserves.
To do this, labor costs skyrocket as do those associated with equipment and other industrial aspects of mining. The greater lengths and depths that miners must go in the pursuit of gold also equate with increased hazards.
The environmental impacts left in the wake of these operations is also greater. In other words, the price of mining gold continues to rise. When you pile these costs atop one another, they can contribute to higher gold prices, too.
Where Do We Go From Here?
During the subprime mortgage crisis of 2007 and 2008, which inevitably led to the Great Recession of 2008 and 2009, gold became a highly prized commodity again. And it’s little wonder why.
During times of trouble and uncertainty, this precious metal is seen as a “haven,” capable of weathering any onslaught that the economy throws its way. When turbulent times appear on the horizon, people start exchanging paper for gold coins and bars.
Unlike real estate, equities, and bonds, its value won’t drop off the face of the map. Gold protects against currency deflation and the caprices of the stock market. It also provides added financial safety during times of political instability.
As people watched their fortunes evaporate from the stock market from 2008 through 2009, many came to the prudent conclusion they needed more gold in their portfolio. A demand began that remains at the heart of high gold prices to this day.
As people continue to look to gold as the great savior of their investments, gold’s value will stay high. But how long this will last remains a question we’d all like the answer to.
Why and How to Invest in Gold
What’s the takeaway from all of this? Gold prices are at an all-time high as a result of many different factors, including central banking practices, uncertainty, and increased difficulty mining the substance. That makes this moment an excellent time to consider cashing in your gold before prices drop once more.
Are you interested in learning more about how to protect your wealth during these uncertain times? If so, you’re far from alone. Of course, not all investment advice is created equal.
We’ve reached out to the best experts in each field to provide you with must-have advice to preserve your hard-earned savings and investments. Browse our blog now for more information on how to thrive, no matter the market’s uncertainty.
