Panic, Prosperity, and Progress by Timothy Knight

Author:Timothy Knight
Language: eng
Format: epub, pdf
ISBN: 9781118746110
Publisher: Wiley
Published: 2014-01-18T16:00:00+00:00

■ Gold Riding Shotgun

Throughout all the Hunts’ silver drama, gold likewise participated in its own highly correlated bull market. Unlike silver, gold was not the beneficiary of a very focused buying spree by the richest men in the world, but it had its own reasons for moving higher.

In May 1973, gold was pegged at $42.22 per ounce by the government, but by January 1980—the same month silver peaked—gold hit a lifetime record of $850 per ounce, a 20-fold increase. Besides the surging inflation of the late 1970s, political unrest in Afghanistan (specifically, the Soviet invasion) as well as the turmoil in Iran with the taking of American hostages fueled the flames of international worry. Such fears often drive money into historically safe assets, and in this case, the safest asset of all was perceived as gold.

Although gold had enjoyed a spectacular run during the final years of the 1970s, once the price peaked in January 1980, gold would enter a grueling, seemingly interminable bear market of its own for nearly 20 years. It would finally bottom at $251.70 in August 1999, near the height of Internet stock mania. In inflation-adjusted terms, the peak price of gold in early 1980 was well over $2,000 per ounce, a price that, as of this writing, has never been matched (see Figure 15.9).

FIGURE 15.9 Gold's gains in the 1970s were spectacular, like silver’s, but in the 1980s and 1990s, gold was a catastrophically bad investment.

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