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this day in history 1980

Gold prices soar

After being released from government control, gold reaches a new record price on January 14, 1980, exceeding $800 an ounce. Gold is scattered sparsely throughout the earth’s crust and since ancient times has been treasured for both its scarcity and metallurgic properties. Before the 19th century, most nations maintained a bimetallic monetary system, which often included gold but consisted mainly of silver. Beginning in Great Britain in 1821, units of currency were redeemable for a fixed quantity of gold, a change that Britain hoped would stabilize its rapidly growing economy. As the Industrial Revolution spread, other countries followed suit, and by the late 19th century most industrialized nations were on the gold standard. In the new global economy, the common standard facilitated international monetary transactions and stabilized foreign exchange rates. The reign of the full gold standard, however, was short. In 1914, the curbing of gold exports at the outbreak of World War I forced recourse to inconvertible paper currency.

After the war, the gold standard returned, but economic growth in the 1920s overtook the gold reserves, and some nations supplemented their reserves with stable currencies like the pound and dollar, which like gold had obtained a measure of permanent abstract value in people’s minds. In 1930, the world economy collapsed and the gold standard with it. In response, most governments sharply limited the convertibility of paper currency. In the United States in 1933, President Franklin D. Roosevelt prohibited the circulation of gold coins; though gold was still used in defining the value of the dollar. In the United States and many other countries, currencies remained “pegged” to gold until the 1970s, when dwindling global reserves signaled the final death knell of the gold standard. In 1971, the United States suspended the free exchange of U.S. gold for foreign-held dollars, then in 1974 lifted its four-decade ban on the private purchase of gold. At that time, gold bullion was being traded in European markets at highs approaching $200 an ounce. In 1975, the U.S. government began to sell some of its holdings on the open market and in 1978, along with most other nations, officially abandoned the gold standard. After being released from government control, the price of gold soared, with its most staggering increase recorded January 14, 1980, when the price jumped to more than $800 an ounce.