Gold and Silver Prices in Troubled Financial Markets
Today (Feb. 2), stock market prices are teetering. Debt instruments are effectively paying a negative return, meaning that they are losing purchasing power faster than they are generating interest income. What has happened in the past to the prices of gold and silver during troubled financial markets?
When Jimmy Carter was president more than 40 years ago, consumer prices soared. This sparked the first major surge in Americans buying gold and silver to protect their finances. The prices of gold and silver peaked in January 1980, jumping more than eight times what they were just a few years earlier.
During the Great Recession in the first decade of this century, the prices of an ounce of gold and silver ended the year 2006 at $635 and $12.83, respectively. As the recession hit, gold rose 30 percent and silver 15 percent at the end of 2007.
They rose even further in 2008 before the U.S. government arranged to temporarily suppress prices. Low prices from July 2008 through the end of that year led to a massive surge in customer demand for gold and silver.
This demand surge continued as the recession was ending, especially when it was revealed in December 2011 that the U.S. government had provided $29 trillion in loans, subsidies and bailouts to the financial system.
Silver peaked at the end of April 2011 at just under $50 an ounce, almost four times where it was before the recession. Gold peaked in early September that year at just over $1,900, triple its pre-recession levels.
As the economic lockdowns were put into place almost two years ago at the onset of the COVID pandemic, the U.S. Dollar Index had just reached a 17-year high on March 20, 2020, at 102.75. From there, the U.S. dollar quickly lost 10 percent of its value against other currencies, touching bottom on Jan. 5, 2021, at 89.44. From mid-March 2020 to August 2020, gold’s price soared 40 percent and silver jumped 150 percent.
While gold and silver prices will never move in a straight line, how high will they rise the next time that U.S. economy turns down?
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including in 2021 for Best Investment Newsletter), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at www.1320wils.com).
