Over the years the store value of notes and coin hasn’t maintained its value like gold. Gold has been seen as a way to pass on the wealth of one generation to the next. What are some other reasons why gold goes up in price:
- The US dollar is seen as the reserve currency and when its value drops there tends to be move towards buying gold as security and this ultimately increases its price. After the GFC of 2008 the price of an ounce of gold went from approximately $1,000 to $1,900.
- Geopolitical uncertainty also sees people look to gold for relative safety – a good example was the drone strike that killed Qassem Suleimani, leader of the Quds Force of Iran’s Islamic Revolutionary Guard Corps. The price of gold rose around 3% one week after the event. The events of 9/11 saw gold rise by 6% – see Economist graphic.
- Gold is also very prevalent in the culture of some countries. India is one of the largest gold-consuming countries and it mainly used for jewellery.
Below is a clip from the Corporation Documentary where commodities trader Carlton Brown gives his reaction on the trading floor when the events of September 11 were unfolding. He talks of the price of gold ‘exploding’.