Gold and Economics

When common people were buying gold jewellery back in the eighties they had no idea that they were storing their wealth in any way as a buffer for the economic downfall of the coming world economies. Most of them predominantly were buying gold jewellery for cosmetic purposes and had no inclining to as the value of the spending power they were protecting. In the early part of the eighties the value of gold was approximately 235 dollars per troy ounce.

At the advent of the early nineties and the economies of the world were swaying people were still unaware as they amassed gold jewellery. By the 90’s the price of gold was peaking at about 345 dollars per troy ounce. As 1997 approached and retrenchment was the order of the day as economies throughout the entire planet was crumbling with the fall of the US dollar and the Eurozone crisis which were listing sharp falls in their GDP and the outright bankruptcy Argentina was facing along with most other South American countries namely Ecuador, Peru, Brazil and Mexico people started to sell gold jewellery to get by and to their amazement they received three times the amount they purchased the gold jewellery for.

This phenomenon sparked off a huge gold selling spree throughout the globe. People who lived in poverty actually managed to leave the embraces of the poverty of they were in via selling the gold they possessed which were accumulated by them since the 80’s. As more people were selling gold, more people started buying gold and started up small businesses. These small upstarts of gold buyers sent the prices of gold soaring till it hit its peak in 1997 when the prices of gold cleared the 700 dollar a troy ounce mark. Those who had a gold chain in poverty stricken countries were able to buy and pay for all their basic necessities for a period of 2 months with a single gold chain weighing at only 2.5 troy ounces.

As the economies eased people who realized the ‘store value’ of gold started buying gold again only this time they bought gold in view of an investment aspect rather than for cosmetic purposes. This rise in the availability and number of ways to buy gold bullion in the marketplace (physcial, stocks and securities) finally made headlines when the prices of gold passed the 1000 dollars per troy ounce mark in 2007. Did the value of gold really go up? The answer to that question is no. The value of gold did not rise, what happened was that the value of currency dropped.

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