49

Annual Average Gold Price

(Dollars per troy ounce)

0

200

400

600

800

1,000

1,200

1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998

YEAR

DOLLARS

1992 dollars

Current dollars

Au

Gold

by Earle B. Amey

Significant events affecting U.S. gold prices since 1958

1961 The London gold pool was established in which U.S. central banks and seven other nations agreed to buy and sell gold

to support the $35 per troy ounce price that had been established on January 31, 1934

1968 The London gold pool sustained enormous losses and was discontinued; the two-tier gold price was established, one

tier was for official monetary transactions, the other for open-market transactions

1969-70 Mild U.S. recession 

1971 President suspends convertibility of dollar into gold, dollar devalued by 7.9%

1972 Official U.S. gold price increased to $38 per ounce 

1973 Official U.S. gold price increased to $42.22, dollar devalued, two-tier gold price terminated, Organization of

Petroleum Exporting Countries (OPEC) oil embargo begins

1974 U.S. citizens allowed to hold gold bullion and coins for the first time in 40 years 

1975 U.S. Treasury begins public sales of gold stocks

1976 International Monetary Fund (IMF) begins 5-year gold sales program, IMF auctions and lower inflation outlook drive

gold prices down 

1977 Hiatus in U.S. Treasury gold sales 

1978 U.S. Treasury resumes selling gold, Middle Eastern investors increase gold purchases

1979 Soviet Union invades Afghanistan; political upheaval in Iran, taking of U.S. hostages 
50

1980 Gold price peaks at an historic daily high of $850 per ounce on January 21, IMF completes 5-year gold sales program

1982-88 Fluctuating world currency exchange rates, increasing concern about U.S. trade and budget deficits and banking

problems, and Third World debt 

1989-91 Conflict in the Persian Gulf and the breaking up of the Soviet Union, erosion of gold’s role as a safe haven for

investors, generally weak economic growth worldwide

1992-96 Gold price remains relatively stable 

1997-98 Central banks of several countries sell large shares of gold holdings to meet common-currency criteria for European

Union or to demonetize; bank failures or insolvencies in East and Southeast Asian countries

The price of a fine suit of men’s clothes can be used to

show anyone who is not familiar with the price history of gold

just how very cheap gold is today. With an ounce of gold, a

man could buy a fine suit of clothes in the time of

Shakespeare, in that of Beethoven and Jefferson, and in the

Depression of the 1930’s. In fact, this statement was still true

in the 1980’s, but not in the late 1990’s. The suit standard

now implies a gold price of perhaps $1,000 per troy ounce.

Today, a really good man’s suit can easily cost 4 ounces of

gold, and that is without a vest, which once was standard

(Forbes, 1998).

Increases in gold price have had a good basis of precedent

in history. During the period from 1344 to 1717, the price for

gold almost quadrupled,reachingthe equivalent of $20.67 per

ounce. That price was maintained for more than 200 years

until the enactment of the Gold Reserve Act, which increased

it to $35 per ounce, on January 30, 1934. Pressure for still

another increase in price gathered momentum less than 15

years later. Prices as high as $105 per ounce had been

proposed, and world trade brought prices up to $70 per

ounce. (Colorado School of Mines, 1959).

In November 1961, the London gold pool, in which central

banks of the United States and seven other nations agreed to

buy and sell gold to support the $35-per-ounce price, was

established (Ryan and McBreen, 1963, p. 607). On March

17, 1968, the governors of the member central banks

announced that they would no longer buy and sell gold in the

private market, but would sell gold to each other for $35 per

ounce. Thus, a two-tier market was established—an official

market and a private market—in which the price was

determined by supply and demand (Ryan, 1970, p. 535).

Following the establishment of the two-tier price system, a

fixed price of $35 per ounce for officialmonetary transactions

and a floating market price for private transactions, the U.S.

Government asked Engelhard Minerals and Chemicals Corp.

(known today as Engelhard Corp.), to quote a daily price.

Engelhard initiated a buying quotation—the lowest price at

which it could obtain sufficient gold of 99.95% purity to meet

its requirements. A selling quotation $0.60 above the buying

price, later reduced to $0.40, was also established (Ryan,

1970, p. 535). Thus, the basis for the average domestic

market price for gold shown in the table was established.

On August 15, 1971, the President announced the

suspension of convertibility of dollars into gold (West, 1973,

p. 540). Following provisions of Public Law 92-268, the Par

Value Modification Act, enacted March 31, 1972, the official

price of gold was increased to $38 per ounce on May 8, 1972

(West, 1975, p. 557).

Following amendments to the Par Value Modification Act

contained in Public Law 93-110, enacted on September 21,

1973, the dollar’s par value was devalued by 10%, to

0.829848 Special Drawing Rights (a unit of account in the

IMF). This fixed the official price of gold at $42.22 per

ounce effective at 12:01 a.m., October 18, 1973. That price

remains unchanged. The two-tier pricing system was

terminated on November 13, 1973 (West, 1975, p.560).

Following provisions of Public Law 93-373, enacted

August 14, 1974, the President was given the authority to

repeal the prohibition on the holding of gold by private

citizens, and effective December 31, 1974, the prohibition

was repealed (West, 1976, p. 603).

Gold occupies a unique position among the world’s

commodities; it is an internationally traded commodity and a

long-established, universally acceptable storehouse of value,

considered by many people worldwide to be superior to fiat

paper currencies with fleeting longevity or fluctuating

unpredictable value. It has been said many times that gold is

“forever”; its high intrinsic and monetary value usually

dictates that, in time, most of it will be recycled to serve

again. Because of its historically high value, much of the gold

mined throughout history is still in circulation in one form or

another (Lucas, 1993, p. 505).

As a consequence of the dual roles played by gold, as

commodity and as money, its price cannot be viewed as one

would view the price of other goods or services in a free

market. Gold also cannot be viewed strictly from the

standpoint of the U.S. market alone because international

political and economic events that may influence the market

for gold as a commodity may be outweighed by developments

perceived to favor gold as a medium of exchange. 

During1969 and 1970 the United States experienced a mild

recession, while the Republic of South Africa was permitted

to sell gold to the IMF at $35 per ounce or less to meet its

foreign exchange needs (Hoyt, 1970, p. 521).

By December 1971, the U.S. dollar had been devalued by

7.9% per exchange agreements reached during the

Smithsonian Accords in Washington, DC (West, 1973, p.

539-540). Affected by previous year’s devaluation, the

official U.S. gold price was raised to $38 per ounce on May

8, 1972; speculative buying was encouraged by monetary
51

policy changes made by the European Economic Community

and by restricted supplies of newly mined gold (West, 1974,

p. 567).

In 1973, the gold market was influenced by a weakening

and devaluation of the U.S. dollar, lowered confidence in

currency values, higher inflation rates, unsettled world trade,

and, for the third consecutive year, lower mine production.

The official U.S. gold price was increased to $42.22 per

ounce on September 21. An embargo was begun on

petroleum shipments to the United States by OPEC in

mid-October. The two-tier gold price system, begun in 1968,

was terminated (West, 1975, p. 557). 

The OPEC embargo contributed to rising oil prices,

worldwide inflation, and general economic uncertainty in

1974. Gold prices rose on speculation near yearend, pending

the yearend removal of restrictions on U.S. citizens holding

gold. The gold price trend was reversed in December by the

U.S. Treasury’s announcement that it would offer 2 million

ounces of Treasury gold for public sale beginning on January

6, 1975 (West, 1976, p. 603). Investor and speculator

interest was diminished by the announcement by the IMF that

it would sell 25 million ounces of gold on the open market

beginning in 1976. The Treasury, however, was able to sell

1.25 million ounces from its gold stock during 1975 (West,

1977, p. 669).

Monthly IMF auctions were begun in midyear 1976 to

provide capitalfor low-interest loans to developing countries.

The IMF planned to sell a total of one-sixth of its gold stocks,

or 25 million ounces, over a 5-year period, and planned to

restore an equal portion to member countries. In addition, a

reduced inflation outlook drove prices down until October

when the low gold price and renewed anxiety about the

economy served to reverse price trends. The Treasury gold

stock was down at yearend owing to its use in Bicentennial

medals, which were made by theBureau of the Mint and sold

by the American Revolution Bicentennial Administration

(West and Butterman, 1978, p. 591).

The world economy was stagnant in 1977. Limited

successin controlling inflation led to higher gold prices, which

benefitted the IMF auctions that continued throughout the

year. There was a hiatus in Treasury sales (Butterman, 1980,

p. 428).

IMF auctions continued during 1978, and the Treasury

resumed gold stock selling (Butterman, 1980, p. 428).

Middle-East oil-producing countries and investors began

purchasing gold with their eroding dollar assets.

Economic conditions worsened during the next 3 years.

Negative political events in Iran, Afghanistan, and elsewhere

propelled the price of gold to an historic high of $850 per

ounce by January 21, 1980. The IMF completed its 5-year

auction program in May 1980. The Treasury sold no more

gold in 1980 or 1981 (Lucas, 1981, p. 347). After the U.S.

hostages were released by Iran on January 20, 1981, political

tension was lessened, which led to less hoarding and reduced

gold prices. The Japanese began to invest in the gold market.

Although the United States’ strict monetary policy

contributed to a recession and high interest rates in 1982, the

advent of computer tradingcontributed to short-term volatility

in the gold price (Lucas, 1983, p. 370). Lingering effects of

the world economic recession on the mineral industry led to

profit taking during the first part of 1983. Speculative gold

trading to midyear strengthened price but was followed by

profit taking (Lucas, 1984, p. 385). Oil prices weakened,

while gold supplies from mines and officialsourcesincreased.

In 1984, the price declined, owing to increasing strength of

the U.S. dollar and investor selling. Weakened price and a

favorable market outlook contributed to increases in demand

for gold-bearing fabricated products (Lucas, 1985, p. 423).

The U.S. dollar weakened in the first quarter of 1985 against

major European currencies and the Japanese yen. It continued weakening in 1986, which encouraged gold investment

(Lucas, 1988, p. 441) as oil prices declined sharply.

By 1987, there was a sharp reversal in world stock markets

with a continued weakness of the U.S. dollar combined with

growing concern regarding U.S. budget and trade deficits and

increasing U.S. private and Third World debt. Stability of the

international monetary arrangements was questioned. Volatile

investment markets generated increased gold-trading activity

(Lucas, 1988, p. 441). During 1988, gold prices declined in

response to a variety of factors, such as the withdrawalof the

U.S.S.R. from Afghanistan, which gave investors the

perception that political stability was at hand; weakening oil

prices combined with an increase in interest rates by the U.S.

Federal Reserve led to reduced inflationary expectations,

increasingU.S. dollarstrength, as well as improved U.S. trade

results (Lucas, 1989, p. 64-65). 

Officialsector gold sales increased in 1989 as central banks

adopted a more aggressive policy of gold management(Lucas,

1991, p. 468). In addition, a change of attitude developed

toward gold, aided by concerns about the security of bonds

and other financial assets and a setback in the U.S. stock

markets in mid-October (Gold Fields Mineral Services

Limited, 1990, p. 8).

The rise in Japanese interest rates in 1990 provided

alternate investment havens. The U.S.S.R. was reported to

have sold significant amounts of gold for hard currency. The

Chinese sold out of equity swap agreements that were

negotiated in mid-1989. The gold price drifted down as a

result of the Persian Gulf War and the recession (Gold Fields

Mineral Services Limited, 1991, p. 8-9).

The brief multination conflict that started in 1991 in the

Persian Gulf did little to affect the perception of moderating

politicalstability generally or to influence the price of gold for

any sustained period of time. The collapse and restructuring

of the U.S.S.R., however, did much to reduce investor

interest in gold (Gold Fields Mineral Services Limited, 1992,

p. 5). 

The end of the 1992 bear market encouraged a return of

European and U.S. investor confidence. In 1993, the high

gold price, which particularly affected the local currencies of
52

the Middle East and Asia, resulted in reduced hoarding of

coins and large amounts of gold scrap being off-loaded into

the market (Roskill Information Services Ltd., 1995, p. i). 

During 1994, the gold market held onto the gains achieved

during the previous year, but the U.S. dollar price lacked

direction and volatility. Hoarding of gold continued to be

reduced, asinvestors deserted the market (Roskill Information

Services Ltd., 1995, p. i).

The average dollar price of gold remained almost

unchanged between 1994 and 1996. Late in the fourth

quarter of 1996, the Dutch Government provided a key

catalyst by selling one-third of its reserves (Gold Fields

Mineral Services Limited, 1997, p. 5). Fears that other

central banks might sell their gold reserves followed (CRU

International Ltd., 1996, p. 19).

During 1997 and 1998, central banks of several countries

sold large shares of gold holdings to meet common-currency

criteria for the European Union or to demonetize. Bank

failures or insolvencies in East and Southeast Asian countries

created uncertainty in investment circles. The price of gold

returned to the low levels of 1979 (Gold Fields Mineral

Services Limited, 1998, p. 5).

References Cited

Butterman, W.C., 1980, Gold, in Minerals Yearbook 1977, v. I:

U.S. Bureau of Mines, p. 427-445.

———1980, Gold, in Minerals Yearbook 1978-79, v. I: U.S

Bureau of Mines, p. 377-399.

Colorado School of Mines, 1959, The price for gold: Colorado

School of Mines Mineral Industries Bulletin, v. 2, no. 6,

November, p. 10.

CRU International Ltd., 1996, Gold: CRU International Ltd.

Quarterly Market Service, November, 60 p.

Forbes, 1998, Gold miners versus haberdashers: Forbes, May 4,

v. 161, no. 9, p. 50-51.

Gold Fields Mineral Services Limited, 1990, Gold 1990:

[London], Gold Fields Mineral Services Limited, 64 p. 

———1991,Gold1991:[London],GoldFields Mineral Services

Limited, 64 p.

———1992,Gold1992:[London], Gold Fields Mineral Services

Limited, 64 p. 

———1997, Gold 1997: [London], Gold Fields Mineral Services

Limited, 71 p. 

———1998,Gold1998:[London],GoldFields Mineral Services

Limited, 63 p. 

Hoyt, C.D., 1970, Gold, in Minerals Yearbook 1969, v. I: U.S.

Bureau of Mines, p. 521-538.

Lucas, J.M., 1981, Gold, in Minerals Yearbook 1980,v.I: U.S.

Bureau of Mines, p. 347-373.

———1983,Gold, in Minerals Yearbook1982,v.I: U.S. Bureau

of Mines, p. 369-396.

———1984,Gold, in Minerals Yearbook1983,v.I: U.S. Bureau

of Mines, p. 385-411.

———1985,Gold, in Minerals Yearbook1984,v.I: U.S. Bureau

of Mines, p. 405-435.

———1988,Gold, in Minerals Yearbook1986,v.I: U.S. Bureau

of Mines, p. 421-458.

———1988, Gold: U.S. Bureau of Mines Mineral Commodity

Summaries 1987, p. 62-63.

———1989, Gold: U.S. Bureau of Mines Mineral Commodity

Summaries 1989, p. 64-65.

———1991,Gold, in Minerals Yearbook1989,v.I: U.S. Bureau

of Mines, p. 455-482.

———1993,Gold, in Minerals Yearbook1990,v.I: U.S. Bureau

of Mines, p. 495-522.

Roskill Information Services Ltd., 1995, Gold—Market update,

analysis, and outlook: Roskill Information Services Ltd., 145

p., 3 apps., unpaginated.

Ryan, J.P., 1970, Gold, in Minerals Yearbook 1968, v. I: U.S.

Bureau of Mines, p. 529-549.

Ryan, J.P., and McBreen, K.M., 1963, Gold, in Minerals

Yearbook 1961, v. I: U.S. Bureau of Mines, p. 597-618.

West, J.M., 1973, Gold, in Minerals Yearbook 1971, v. I: U.S.

Bureau of Mines, p. 539-560.

———1974,Gold, in Minerals Yearbook1972,v.I: U.S. Bureau

of Mines, p. 567-588.

———1975,Gold, in Minerals Yearbook1973,v.I: U.S. Bureau

of Mines, p. 557-581.

———1976,Gold, in Minerals Yearbook1974,v.I: U.S. Bureau

of Mines, p. 603-626.

———1977,Gold, in Minerals Yearbook1975,v.I: U.S. Bureau

of Mines, p. 669-696.

West, J.M., and Butterman, W.C., 1978, Gold, in Minerals

Yearbook 1976, v. I: U.S. Bureau of Mines, p. 591-615.
53

Annual Average Gold Price1

(Dollars per troy ounce2)

Year Price Year Price Year Price Year Price

1968 40.06 1976 125.32 1984 360.66 1992 344.97

1969 41.51 1977 148.31 1985 317.66 1993 360.91

1970 36.41 1978 193.55 1986 368.24 1994 385.41

1971 41.25 1979 307.50 1987 477.95 1995 385.50

1972 58.60 1980 612.56 1988 438.31 1996 389.08

1973 97.81 1981 459.64 1989 382.58 1997 332.38

1974 159.74 1982 375.91 1990 384.93 1998 295.14

1975 161.49 1983 424.00 1991 363.29

1

 Domestic market price, 99.95%-pure gold.

2

 To convert to dollars per kilogram, multiply by 32.1507.

Source: Engelhard Corp., published in Metals Week [through June 14, 1993] and Platt’s Metal Week.