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Thursday, December 7, 2023

What Was the Highest Price for Gold?

Gold has long been considered a stable means of storing wealth, and the gold price often scores its biggest gains during turbulent times as market participants rush into this well-known safe haven investment.

Unarguably, the 21st century has so far been heavily marked by substantial episodes of economic and sociopolitical turbulence. These uncertain times have pushed the gold price to record highs as investors seek the perceived security of the precious metal. And each time the gold price rises, there are bound to be calls for even higher record-breaking gold prices.

Gold market gurus from Rob McEwen to Frank Holmes to David Smith have shared eye-popping predictions on the gold price that would make any market participant salivate — gold bug or not.

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While some have posited that gold may break US$3,000 per ounce and carry on as high as US$4,000 or US$5,000, there are those with hopes that US$8,000 or even US$10,000 gold could become a reality.

These impressive price predictions have investors asking, “What was the highest price for gold?” The answer to that question is revealed below. And by looking at how the gold price has moved historically, it’s possible to understand what that means for the yellow metal in the future.

Highest price for gold: How is gold traded?

Before discovering what the highest gold price ever was, it’s worth looking at how the precious metal is traded. Knowing the mechanics behind historical gold prices in terms of how the metal changes hands can be useful in understanding why and how its price changes.

Gold bullion is traded in dollars and cents per ounce, with activity taking place worldwide at all hours, resulting in a live price. Investors trade gold in major commodities markets such as New York, London, Tokyo and Hong Kong. London is seen as the center of physical precious metals trading, including for silver. The COMEX division of the New York Mercantile Exchange is home to most paper trading.

There are many popular ways to invest in gold. The first is through purchasing gold bullion products such as bullion bars, bullion coins and rounds. Physical gold is sold on the spot market, meaning that buyers pay a specific price per ounce for the metal and then have it delivered. In some parts of the world, such as India, buying gold in the form of jewelry is the largest and most traditional route to investing in gold.

In 2020, COVID-19 supply chain disruptions made it difficult to buy physical gold. Travel restrictions and other challenges left dealers with limited product to sell, pushing up premiums on physical gold.

Another path to gold investment is paper trading, which is done through the gold futures market. Participants enter into gold futures contracts for the delivery of gold in the future at an agreed upon price. In such contracts, two positions can be taken: a long position under which delivery of the metal is accepted or a short position to provide delivery of the metal.

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Paper trading as a means to invest in gold can provide investors with the flexibility to liquidate assets that aren’t available to those who possess physical gold bullion.

One significant long-term advantage of trading in the paper markets is that investors can benefit from gold’s safe haven status without needing to store it. Furthermore, gold futures trading can offer more financial leverage in that it requires less capital than trading in the physical market.

Interestingly, investors can also purchase physical gold via the futures market, but the process is complicated and lengthy and comes with a large investment and additional costs.

Market participants can also invest in gold through an exchange-traded fund (ETF). Investing in a gold ETF is similar to trading a gold stock on an exchange, and there are numerous gold ETF options to choose from. For instance, some ETFs focus solely on physical gold bullion, while others focus on gold futures contracts. Other ETFs focus on gold-mining stocks or follow the gold spot price.

It is important to understand that you will not own any physical gold when investing in an ETF — in general, even a gold ETF that tracks physical gold cannot be redeemed for tangible metal.

Highest price for gold: Historical gold price action

Gold hit US$2,067.15, the highest price for gold at the time of this writing, on August 7, 2020.

Gold’s breach of the significant US$2,000 price level in mid-2020 was undoubtedly due in large part to economic uncertainty caused by the sweeping COVID-19 pandemic.

To break through that barrier and reach that record high, the yellow metal added more than US$500, or 32 percent, to its value in the first eight months of 2020.

Despite this recent run up, the gold price has seen its share of both peaks and troughs over the last decade. Rising as high as US$1,920 per ounce in late 2011, the price of gold took a deep dive half way through 2013, dropping to about US$1,220. The gold price then remained between US$1,100 and US$1,300 from 2014 to early 2019 — but in the second half of that year, a softer US dollar, rising geopolitical issues and a slowdown in economic growth pushed gold above US$1,500.

gold price chart, 2010 to mid-2021

Gold price chart via Kitco.

Compared to 2020, gold’s price performance in 2021 has been a letdown for many market watchers who were hoping to see further gains. Gold’s failure to do so has surprised investors and commentators alike.

When will gold once again return to its upward trajectory? Only time will tell, but veteran investor Rick Rule, who recently retired from Sprott (TSX:SII,NYSE:SII), views such downturns in the gold market as an opportunity, not a cause for concern, as conditions are ripe for the gold price to push higher.

“I think now that a recovery in the gold price occurs sooner rather than later,” he told the Investing News Network (INN). “I’m always fond of saying that I like things that are inevitable, but might not be imminent — I’m beginning to think that an upward move in the gold price is imminent too as a consequence of the expansion of the negative margin on the US 10 year Treasury.”

Gareth Soloway, chief market strategist at InTheMoneyStocks.com, has advised investors not to get caught up in short-term factors moving the gold price.

“If you’re a long-term gold investor, you just have to continue to look at the facts, which are (that) the money printing is continuing, China continues to go on this path of the digital yuan — they want the digital yuan to be the new global reserve currency, which will ultimately cause downward pressure on the dollar — that’s also inflationary and good for gold,” Soloway told INN. “So all of these factors that are going to play out over the next two, five, 10 years will and should drive up gold’s price.”

Like other metals, the gold spot price can also be influenced by supply and demand dynamics.

China and India are the biggest buyers of physical gold, and are in a perpetual prize fight for the title of world’s largest gold consumer. That said, central bank buying is rebounding after dropping to a decade low in 2020 during the COVID-19 pandemic. In 2019, central banks were net buyers of gold for the 10th year in a row. There are expectations by central bank watchers that net gold buying is likely to bounce back to previous levels over the next few years.

Higher investment demand for gold often translates into higher demand for gold-based mutual funds and gold-mining stocks.

The gold price is also being supported by interest rate cuts, which the US Federal Reserve began implementing in mid-2019 for the first time since 2008. While the gold price initially declined following the announcement, the Fed’s rate cuts have been very supportive of gold prices.

In terms of supply, in 2020, the world’s five top gold producers were China, Australia, Russia, the US and Canada. The general consensus in the gold market is that major miners have not spent enough money on gold exploration in recent years. Gold mine production has been flat for the last five years, at around 3,200 to 3,300 metric tons each year.

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Highest price for gold: Beware gold price manipulation

As a final note on the price of gold and buying gold bullion, it’s important for investors to be aware that manipulation of gold bullion prices is a hot topic in the industry.

In 2011, the last time the price of gold broke a record high, the price of gold dropped swiftly in just a few short years. This price decline after three years of impressive gains led many in the gold sector to cry foul and point to price manipulation. Early in 2015, 10 banks were hit in a US probe on precious metals manipulation. Evidence provided by Deutsche Bank (NYSE:DB) showed “smoking gun” proof that UBS Group (NYSE:UBS), HSBC Holdings (NYSE:HSBC), the Bank of Nova Scotia (NYSE:BNS) and other firms were involved in rigging gold and silver rates in the market from 2007 to 2013.

Not long after, the long-running London gold fix was replaced by the LBMA gold price in a bid to increase gold price transparency. The twice-a-day process, operated by the ICE Benchmark Administration, still involves a variety of banks collaborating to set the gold price, but the system is now electronic.

Still, the issue of price manipulation has by no means been solved, as a 2020 fine on JPMorgan (NYSE:JPM) shows. More recently, chat logs were released in a spoofing trial for two former precious metals traders from the Bank of America’s (NYSE:BAC) Merrill Lynch unit. The logs show one of the traders bragging about how easy it is to manipulate the price of gold.

The world’s gold market participants have consistently spoken out about manipulation, particularly as gold came to a new high. In mid-2020, Chris Marcus, founder of Arcadia Economics and author of the book “The Big Silver Short,” said that when gold fell back below the US$2,000 mark after hitting close to US$2,070, he saw similarities to what happened with the gold price in 2011.

Marcus has been following the gold and silver markets with a focus specifically on price manipulation for nearly a decade. His advice to precious metals investors? “Trust your gut. I believe we’re witnessing the ultimate ’emperor’s really naked’ moment. This isn’t complex financial analysis. Sometimes I think of it as the greatest hypnotic thought experiment in history.”

Highest price for gold: Investor takeaway

While we have the answer to the question, “What was the highest price for gold?” it remains to be seen if the yellow metal can reach as high as US$5,000, US$8,000 or even US$10,000 per ounce. Even so, many market participants believe gold is a must have in any investment profile, and there is little doubt investors will continue to see gold price action making headlines this year and beyond.

For a more in-depth look at gold prices further back in time, head on over to Historical Changes in Gold Prices and The History of the Gold Standard.

This is an updated version of an article first published by the Investing News Network in 2020.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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The post What Was the Highest Price for Gold? appeared first on Investing News Network.

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