Gold Hit Nearly $2,300 (Inflation-Adjusted) in Early 1980

The price of gold has been making the headlines quite a bit as of late.

This is for good reason - gold is currently trading at $1,118.20 USD per ounce, which is an all-time high for the metal. The move higher has been quite dramatic for gold, as it began the year trading at around $875 USD per ounce.

Gold has made its dramatic move higher due to a number of different reasons. Countries such as India and China are aggressively diversifying their forex reserves, which means that they are buying more gold. Many foreign investors are looking to diversify their own US-centric holdings, and this likely means that they are looking to add more gold to their portfolios as well.

In addition, many people are worried about the possibility of high inflation (especially in the United States), and they are using gold to hedge against the potential of high inflation or hyperinflation.

While the near-parabolic move of gold over the past few years has certainly made people sit up and take notice, we are still far off of our all-time highs for gold, when adjusting for inflation.

In 1980, gold traded for an AVERAGE price of $612.56 throughout the entire year. That is $612.56 in 1980 dollars.

The inflation-adjusted average price for gold in 1980? Just over $1,600 per ounce.

Gold hit a record high (at the time) of $850 in early 1980.

There were a number of reasons for this dramatic move higher in 1980.

Sky-high inflation due to the 1973 oil crisis and 1979 energy crisis. Stagflation due to high inflation (inflation in the United States was over 13% in 1980) and weak economic activity in the United States. In addition, the invasion of Afghanistan by the Soviet Union also helped to contribute to the spike in the price of gold.

What does $850 in 1980 dollars work out to in 2009 dollars?

Approximately $2,250.00 per ounce.

So, while the highs that we are setting in 2009 for gold are certainly noteworthy, it is important to note that we are still well off of the 1980 inflation-adjusted highs.

Sources: Historical Gold Prices

Bloomberg.com - Gold at $2,000 Becomes Inflation-Adjusted Bullseye for '80 High


Filed under: General Knowledge

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