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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.

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 gold’s historical moves can help illuminate 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 for the metal. 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.

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. 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.

Aside from those options, market participants can invest in gold through exchange-traded funds (ETFs). 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 center 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.

What is the historical price of gold?

Gold hit US$2,074.60, its highest price at the time of this writing, on March 8, 2022.

Gold’s first breach of the significant US$2,000 price level in mid-2020 was undoubtedly due in large part to economic uncertainty caused by the COVID-19 pandemic. To break through that barrier and reach a record high, the yellow metal added more than US$500, or 32 percent, to its value in the first eight months of 2020.

The gold price hits its latest record high as Russia’s invasion of Ukraine collided with rising inflation around the world, increasing the allure of safe-haven assets.

Despite this recent run, gold 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 metal took a deep dive halfway through 2013, dropping to about US$1,220. It then remained between US$1,100 and US$1,300 from 2014 to early 2019. However, in the second half of 2019, a softer US dollar, rising geopolitical issues and a slowdown in economic growth pushed gold above US$1,500.

gold price chart, january 2000 to september 2022

Gold price chart, January 2000 to September 2022.

Gold price chart via Kitco.

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

The gold outlook for 2022 was initially much brighter, but the yellow metal has fallen since hitting its historical record price in March. Despite a brief pickup in the summer months, it entered the fall below the US$1,700 level.

When will gold once again return to its upward trajectory? Only time will tell, but veteran gold investors often view such downturns in the gold market as an opportunity to buy, not a cause for concern.

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 — and that’s also inflationary and good for gold,” Soloway explained. “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 fight for the title of world’s largest gold consumer. That said, central bank buying rebounded in 2021 after dropping to a decade low in 2020 during the pandemic. Central bank watchers expect that net gold buying is likely to continue throughout 2022.

Higher investment demand for gold often translates into higher demand for gold-based mutual funds and gold-mining stocks — as market strategist Paul Wong explained in a report from Sprott, “Gold positioning from investors is returning to the levels last seen during the peak in 2020.

In terms of supply, in 2021 the world’s five top gold producers were China, Australia, Russia, the US and Canada. The consensus in the gold market is that major miners have not spent enough 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 tonnes each year.

Should you beware of 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 gold price manipulation is a hot topic in the industry.

In 2011, the last time the price of gold broke a record high, it dropped swiftly in just a few short years. This decline after three years of impressive gains led many in the gold sector to cry foul and point to 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, manipulation has by no means been eradicated, 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. They show a trader bragging about how easy it is to manipulate the gold price.

Gold market participants have consistently spoken out about manipulation. 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? “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.

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.

What is the relationship between the gold price and the stock market?

Gold has an interesting relationship with the stock market. The two often move in sync during “risk-on periods” when investors are bullish. On the flip side, they tend to become inversely correlated in times of volatility.

According to the World Gold Council, gold’s ability to decouple from the stock market during periods of stress makes it “unique amongst most hedges in the marketplace.” It is often during these times that gold outperforms the stock market. For that reason, it is often used as a portfolio diversifier to hedge against uncertainty.

Does the gold price always go up during a recession?

Gold is considered a hedge against uncertainty, meaning investors often turn to the yellow metal in times of volatility. The precious metal has historically performed well during recessionary periods because it is a store of wealth.

Gold’s global allure provides it with massive liquidity while allowing it to retain its purchasing power in the long term. All of these factors provide support to the precious metal during recessions. However, the gold price is known to dip slightly at the beginning of an economic downturn before recovering and trending higher.

What affects the gold price?

There are many factors that affect the gold price, but some of the most prevalent long-term drivers include economic expansion, market risk, opportunity cost and momentum.

Economic expansion is one of the primary gold price contributors as it facilitates demand growth in several categories, including jewelry, technology and investment. As the World Gold Council explains, “This is particularly true in developing economies where gold is often used as a luxury item and a means to preserve wealth.”

Market risk is also a prime catalyst for gold values as investors view the precious metal as the “ultimate safe haven,” and a hedge against currency depreciation, inflation and other systemic risks.

Article by Melissa Pistilli; FAQs by Georgia Williams.

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.

Securities Disclosure: I, Georgia Williams, 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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