Gold has been traditionally been a strongly cyclic commodity subjected to violent upward and downward fluctuations of price and consumption. This market uncertainty has to a large extent been produced by the fact that gold resources have been divided among several geographical areas and several national groups among which there has been relative little cooperation and coordination. The gold mining industry has often allowed market regulation to be brought about by means of special interests and the mining industry has traditionally been quick to cut prices and prior to 2000, slow to curtail production to stabilize the gold price.
The function of governments in the gold business has been of important value for many years, some of them would be a potential stabilizing factor in the gold market if gold were brought during periods of oversupply and sold during period of shortage. It is important to indicate that the approach to gold markets reduced basically to the study of variations in fabricated gold needs and comparisons of several producers marginal costs for new gold production. Also, short changes generate daily fluctuations in the price of gold. It has been noted the last years that secular gold price will indicate the more dynamic forces working overtime, including technological improvements or changes in the gold market structure. In this way, a typical analysis considers short run trends are linear.
According to some analysts, the change in the short run prices and ounces of gold commercialized are very high to admit this conventional conception. Moreover, the assumption of a strong secular upward trend in gold articles demands is not easily demonstrated by usual trends. The common approach, while it may name the important monetary variables, neglects them quantitatively or treats bullion investment as current account changes in inventories rather than changes in capital accounts. The price of gold is influenced by monetary, economic and political factors. For several years, until early 1920s, its price was controlled by governments and pegged at U.S.$ 21 per troy ounce.
In 1934, President Franklin Roosevelt officially raised the price of gold to U.S.$ 35 per troy ounce and in effect, re-established the gold standard which had been displaced by floating exchange rates following the first World War. Some years later, the Bretton Woods agreement ushered in an era of fixed exchange rates whereby several world currencies were exchangeable into the American dollar, which was readily exchangeable into gold. The system worked in good conditions into late 1960s when speculative pressure against the dollar produced a run on gold. This brought in the two-tier gold system where there wa an official market for central banks and free market for others.
Since 1972, gold has been freely traded on terminal markets, Zurich and London bullion markets vied for dominant influence. The Winnipeg Commodity Exchange started the trade in gold futures in 1972. Comex and other American markets followed suit to create a lively spot and futures market. Nowadays, gold price is not stable due to it is based on terminal market buying and selling. It is important to mention that gold is an investment of last resort and functions as currency and increase in value as other currencies fall. Basically, its price in a given currency will grow during times the currency is weak and fall when the currency is strong. Gold prices quoted on spot and futures markets are for 99.99% pure gold.
Gold prices from 2001 to September, 2010