A Long Term Look at the Gold Price

Click to enlarge

Last time, we looked at the inflation-adjusted gold price over the past 100 years. While it was shown that the current gold price is near a 100-year high, it has not yet eclipsed its 1980 value in constant 2013 dollars. Further, we saw that during the period of the Bretton Woods agreement (1944-1971), the inflation-adjusted value of an ounce of gold was in the $250 to $500 range.

This time, we’ll have a look at the value of gold over the past 800 years or so. Obviously records from more than 200 years or so ago become rather difficult to interpret, so our best measure is taken from the contemporary value of English gold coins. The first post-conquest English gold coin was the Gold Penny, struck by Henry III in 1257. This provides a good starting point for our review, and England’s issuance of gold coins has continued almost uninterrupted from 1344 until the present day. Some of the major denominations have included the Florin, the Angel, the Noble, the Guinea and the Sovereign.

One of the more interesting things revealed by the above chart is the historically high price of gold. For most of the first 500 years shown, the price of gold was in the range of $600 to $1,200 per ounce, with a brief period between 1460 and 1560 when it fluctuated between $1,200 and $1,800. Historically, this period began after the devastating Hundred Year War, and encompassed the War of the Roses and the disastrous financial mismanagement of England by Henry VIII.

For the following 200 years or so or so, the gold price remained relatively stable between about $600 and $900. Following the American Revolution and a hard money crisis, the inflation-adjusted price of gold fell into the $300-$600 per ounce range where it remained for the next 200 years.

Looked at over such an extended period as nearly a millennium, one thing is relatively clear. Gold is a tremendous store of value, and while 800 years is considerably longer than any individual need be concerned about, there is something fascinating about the first point and last point on the chart differing by only about 20%.