Graph: The Price of Gold

Today, we look at the historical gold price (nominal) from 1972 (the US left the gold standard in 1971) to now, in the graph below.

Data Source: Bundesbank; Prices are monthly averages of London afternoon fix spot prices

As you can see from the graphs, the gold price per ounce stayed in a band of US$200 – 500 from the 1980s to the mid-2000s. Then it started increasingly rapidly, together with the rest of the commodities. The average gold price for January 2012 already reached US$1,656 per troy ounce.

Why has the gold price gone up by so much? The price of gold, like that of most commodities, is driven by supply and demand as well as speculation.

On the demand side, gold demand includes:

•  Household gold demand, mainly from Asian countries like China (gold ownership for Chinese citizens was legalized in 2004) and India, with a large part of it in jewellery
• Central bank gold reserves buying
•  Increasingly, a large part of gold demand has been from investment in gold.
• Currency (gold coins)
• Electronics, Dentistry and other industrial uses
• Gold hedging by producers (though these are at very low levels now due to the high gold prices)

On the supply side, gold supply includes:

• Gold production from gold mines
• Recycling of old gold – Most of the gold ever mined still exists in some form or other, and could come back into the market at the right price.

Would the gold price go up further? It depends on all of the above factors and the market sentiment.

  

If you like price per gram instead, here’s the chart. (This uses the conversion: 1 ounce of fine gold = 31.1034768 g)

Data Source: Bundesbank; Prices are monthly averages of London afternoon fix spot prices

You can also find here a comparison of the price of gold vs the cash cost of mining gold in recent years.

Data Source: Bundesbank; Graphs: Generated by me