Gold Price During Recession

Gold in US dollars, or as we like to say more explicitly around here, gold in fiat Federal Reserve note terms, continues to build further momentum for an eventual breach of its old August 2011 nominal price high of around $1,900 oz.

Whether that happens later this year in 2020, or in the coming years and months, is not our task in predicting. But we as bullion buyers ourselves, we see $2000 gold as an upcoming gimme.

A future supportive price point whose seeds have already been sown.

Late last week here on SD Bullion’s blog, we showed viewers various gold price charts from around the world.

These varying gold price charts illustrated hundreds of fiat currency denominated gold values breaking out to new all-time price highs. If you missed that video, stay tuned to the end of this week’s video below, and click through to see those confirming gold price chart breakouts in other major fiat currencies for yourself.

If the stock market crashes what happens to silver and gold?

This week we want to focus on historic US Stock market downturns. And mainly examine them through percentage losses juxtaposed by gold, and silver values through the same timeframes.

And while we’ll take a brief long look back at gold in US Recession history, we will mainly focus on the more modern supposed “free trade” and financialization era.

What we like to more explicitly call the full fiat currency era, which is now nearing 50 years in duration.

Going way back to our nation’s founding and then near split up some 90 years later, there have been many times in which steady or even rapidly escalating silver and gold values have helped US citizens preserve their purchasing power, and too at times get caught up in price manias that eventually busted and came back to perhaps fairer values.

Late in the US Civil War, the silver price history was made as the white precious monetary metal’s nominal value more than doubled in the year 1864.

And in the economic recession which followed the US Civil War (gold vs greenback era), the price of gold nearly 8 folded in US Dollar terms going from $20.67 oz to as high as $160 by the late 1860s.

Great Depression Gold Silver Price Era

By the end of the 1920s stock market mania, peak to trough the US stock market lost over 90% of its nominal value into the heart of the 1930s Great Depression.

The price of US Citizen’s confiscated gold went from the $20.67 they were paid for handing it into their local Federal Reserve branch in the year 1933. Only to have those same dollar bills devalued to gold by some 70% with a new arbitrary $35 oz price by fiat decree in 1934.

An arbitrary fixed price, which looking back based on the amount of US dollar notes then in circulation was too low and likely extended the deflationary depression then ongoing (even Jeopardy contestants do not know these basic US financial facts).

The financial powers that were for decades following, tried to maintain that too low a gold price artificially only to have their London Gold Pool price rigging scheme fail at suppressing gold prices in 1968.

As promised to start this video embedded above, we are going to focus in on the last 5 decades of time for silver and gold price during recessions within secular bullion bull markets.

From just past the time when the USA and then President Nixon went full fiat currency breaking the final ties of the Bretton Woods agreement.

We are going to specifically look at how gold and silver faird during its 2 major secular bullion bull markets spanning the 1970s to and within this 21st Century. We will specifically hone in on 3 US stock bear markets and 1 major stock market decline.

How did gold and silver fare during such durations?

First stock bear market, early 1973.

From January 1973 to the end of 1974. The S&P 500 fell by 43.4% while gold ran from around $66 to just under $200 oz, a tripling in nominal terms. Silver ran from $2 oz to 4.75 oz by the end of 1974.

Next stock market downturn began in the fall of 1976 and nominally bottomed out in the spring of 1978, a nominal drop of nearly -20% in about a year in a half of time. While the S&P 500 bounced with some nominal increases in the months that followed, it mainly moved sideways into the early 1980s, while gold and silver mania phased many.

From the fall of 1976 gold went from about $120 oz to peak over $800 oz in early 1980.

Silver ran from $4.34 and ounce to near $50 as the Hunt Brothers got scapegoated as commodity price explosion poster children.

Moving on to this 21st Century bullion bull market.

The first internet bubble began its rollover in March 2000, and it would not stop devaluing until October of 2002.

While over that timeframe the S&P fell -49.1%, the gold price in fiat Fed Notes went up nominally 12.1% while the over 129 million ounces sitting with Warren Buffett’s Berkshire Hathaway silver hoard lost about 14.3% in nominal terms going from $5.09 oz to $4.34 oz.

The final and last stock bear market began on Oct 9, 2007, and did not end until early March 2009 nominally falling over 56.7%

Gold during that same timeframe was up over 28%. And its early March 2009 price of $930 oz went on to more than double nominally within 2 1/2 years time to follow. Silver while very volatile throughout this stock bear market ranging from highs of just over $21 oz to a low of just under $9 oz spot stayed relatively flat during the roundtrip of this 2007 peak to 2009 trough for the S&P 500. Silver starting it just around $13 oz and ending it right around there too, only to nearly nearly quadrupled in price just 2 years and a few months following.

I personally worked on the front lines of the wholesale and retail industry at the time. During the most acute phase, in the late fall of the 2008 financial crisis, both precious metals outperformed their respective spot prices due to shortages of deliverable bullion products for many months running. Gold bullion products had upwards of over 20% premiums for 1 oz Gold Eagle coins and Silver Eagle coins peaked with 80% premiums above the then silver spot price in November 2008.

There were many bullion dealers and mints at the time who had nothing to deliver and only promises to sell.

Most likely looking ahead, the Federal Reserve and the US Treasury are going to keep devaluing the fiat Federal Reserve note to help mask the losses in purchasing power that S&P 500 investors will lose measured in gold and silver bullion in the coming years.

On a real basis measuring inflation versus interest rates, negative interest rate policies have been ongoing here in the USA since the middle 1990s to the present day, 2020.

Gold loves the collective inflation lies we compound collectively. More are coming.

If our fiat future rhymes at all with the full fiat past, S&P 500 investors stand to possibly again lose 10x in value versus gold from here to potentially there.

Of course, no one knows the future. And that is precisely why bullion buyers acquire and maintain prudent precious metal allocations these days.

Will this current virus be the black swan that brings on a global and US stock market recession?

How far with fiat currencies have to devalue versus gold before confidence in them gives way to runaway get me out these currencies price inflation.

Time will tell, and we will hedge our bets accordingly.

← Previous Next →
We can't find posts matching the selection.
James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...