Gold has been considered sacred for millennia, with historical records showing that it was used for both ornamental and trade purposes as far back as the Mesopotamian era. The Ancient Egyptians mastered the art of refining gold, but used it more for adornment purposes rather than a form of money.
In the middle ages, gold was used as a form of value storage, while silver became the common mode of coin payment. It was the Crusades and the trade boom in ancient Europe and beyond that brought back gold as a mode of payment.
Gold’s increase in value and fluctuating rates
The yellow metal witnessed a sharp rise in value in the 14th and 15th centuries due to the dip in European mining, which resulted in a low supply of gold that could not meet existing demands. This subsequently made gold coin production rarer and triggered a consistent deflation over time.
Gold production increased with the discovery of the Americas, and this helped curb deflation in Europe to the point where an inflation in gold prices became the norm in Europe and later on, even in Asia. However, the value of gold coins dipped sharply in the late 16th century, when the practice of mixing other metals with gold became commonplace
Sir Isaac Newton’s role in determining gold prices
As Warden of the Royal Mint, Sir Isaac Newton played a key role in determining silver and gold prices. This helped establish the Gold Standard in UK in the early 19th century, and then in other countries over time. Fixed conversion rates became standard thereafter.
The emergence and might of the British Empire made the British Pound the official reserve currency at the time, but the American Civil War and the gradual rise of the USA as a strong economic force played a significant role in upping gold rates yet again. This was until 1934, when the American dollar was devalued, and gold prices spiked by over 65 percent.
The 1970s up until today
President Richard Nixon axed American dollar’s convertibility to gold in 1971, which put an end to the pivotal role gold played in global currency systems. World crises over the decades such as the Oil Price Shock of the mid-70s, Iran’s Islamic Revolution, the Soviet invasion of Afghanistan, and the 1986 sanctions on South Africa prompted the continuous upsurge in gold rates.
This equated to an ounce of gold being worth $2,300 per ounce in inflation-adjusted U.S. dollars, as of 2008.