Bullion increases in value by an approximate average of 34.5 per cent every year, but in recent times, the price of gold has risen sharply. Real-time gold price fluctuations are just as common as changes to stocks, shares and other commodities. However, investors are currently maintaining a keen eye on the market because some experts are predicting a major slump in prices.
A person with little knowledge of the industry might assume that prices have risen steadily since the 1970s, when bullion could be purchased for less than £15 at times. Today, gold is priced above £1,000, so there has been a major shift in four decades. The problem with average annual increments is that they do not describe the story of gold prices as it unfolded. Gold has not risen consistently in value since the 1970s. On the contrary, prices stagnated for the best part of three decades. In 1980, gold threatened to break the £300 mark for the first time, before falling to £196 just two years later. In 1983, gold prices spiked above £318, but this marked a peak that would be followed by gradual decline. To illustrate the point, gold was worth £175.80 in July 1992 and £157.82 in August 1999. Gold prices would not stabilize above the £300 mark until January 2006. It is at this point that gold became the hottest commodity available. Paper currencies such as the US dollar and pound sterling were immensely strong up until the end of 2007, when the financial downturn forced investors to change their tactics. Whereas investments in stocks and shares had offered bountiful gains for many years, gold had provided investors with very little until after 2007, when prices leapt from around £350 to £1,100 in the space of a few years. Gold rose rapidly predominantly because the economy was weak.
Talk of the rise and fall of gold prices presupposes that decline is inevitable. After all, the maxim that what goes up must come down can hardly be wrong – or can it? Must gold prices fall? Must there be a decline just because the rise between 2007 and 2011 could be regarded as anomalous? The answers to these questions remain unclear. Gold is falling from its peak, but not dramatically so. Bullion has managed to hold station at just above £1,000. Though it is quite likely that gold prices will fall below this figure, there is little way to determine the extent or duration of any such drop. Economies are continuing to struggle at the moment, so gold will remain valuable for at least as long as investors see it as a good way to hedge weaknesses in paper currencies. When stocks and shares are more reliable, however, gold should fall further, but it is highly unlikely that the price of bullion will fall to pre-2007 rates.
The price of gold is a strong indicator of the current global economic situation, a situation that author and webmaster, Daniel Whitmore has analyzed since graduating from the University of Kent in 2008.