Rarer than diamonds, gold is formed during cataclysmic cosmic events such as merging neutron stars. With economic cataclysm quickly approaching, it seems possible that gold could find itself back amongst the stars. In fact, gold’s bull market against most currencies began a couple years ago, acting as a flight to safety against inflation, near-zero interest rates, and skyrocketing global debt.
For over 7000 years humans have sought and appreciated this amazing metal for its beauty. Although there are many industrial uses for gold, the store-of-value use-case is the most interesting, both historically and today.
“King Nebuchadnezzar of Babylon, reigning in the 6th century BCE, bought 350 loaves of bread for an ounce of gold. 2500 years later, an ounce of gold would buy roughly the same number of loaves of bread. If we also then look at how gold compares with the historic purchasing power of the world’s major currencies over the last century or more, we see none of them has endured like gold.” – John Mulligan, World Gold Council
While understanding the value of gold, I honestly know very little about its history. Let this article serve as an education for us both. Please enjoy this brief history of gold!
- Evidence suggests that around 5,000 BCE, gold and copper became the first metals to be discovered by man.
- Humans have been decorating themselves with gold since at least 4000 BCE, according to the National Mining Association.
- Egyptians were mining for gold from as early as 2,600 BCE. A hieroglyphic inscription has been discovered which states that Egyptian gold was ‘more common than dirt.’
- The Turin Papyrus shows the first map of a gold mine in Nubia, a major gold producer in antiquity, and the Egyptian word for gold was “nub” – from gold-rich Nubia.
- King Croesus of Lydia created the first pure gold coins in 540 BCE.
- The Greeks thought that gold was a dense combination of water and sunlight.
- Celts in the third century BCE wore gold dental implants.
- Emperor Augustus, who reigned in ancient Rome from 30 BCE to 14 CE, set the price of gold at 45 coins to the pound.
- 211-217 CE: During the reign of Roman Emperor Marcus Aurelius Antoninus, the value of gold was debased to 50 coins for a pound.
- From 284 CE to 305 CE, Roman Emperor Diocletian debased gold to 60 coins for a pound.
- Constantine the Great debased the value of gold to 70 coins for a pound from 306 CE to 337 CE.
- In 301 CE one pound of gold was worth 50,000 denarii, the standard Roman silver coin. By 337 CE, one pound of gold was worth 20 million denarii.
- A carat was originally a unit of mass based on the carob seed used by ancient merchants.
- In 1257, Great Britain set the price of an ounce of gold at £0.89. It raised the price by about £1 each century, as follows:
- 1351 – £1.34
- 1465 – £2.01
- 1546 – £3.02
- 1664 – £4.05
- 1717 – £4.25
- During the fourteenth century, a drink of molten gold and crushed emeralds was used to treat the bubonic plague.
- The Aztec word for gold, “teocuitatl,” was translated by Europeans as meaning “excrement of the gods.”
- In 1511, King Ferdinand of Spain coined the phrase: “Get gold, humanely if possible, but at all hazards, get gold.”
- The “troy ounce” of gold comes from the French town of Troyes, which first created a system of weights in the Middle Ages used for precious metals and gems. One troy ounce is 480 grains. A grain is exactly 64.79892 mg.
- The first major gold rush in America occurred in 1799 in North Carolina, when a young boy discovered a massive 17 pound gold nugget in Cabarrus County.
- In 1848, while building a saw mill for John Sutter near Sacramento, California, John Marshal discovered flakes of gold. This discovery sparked the California Gold Rush and hastened the settlement of the American West. The California Gold Rush (1848-1855) was the largest mass migration in American history. 90% of the world’s gold mining has been done since the discovery of gold at Sutter’s Mill in California in 1848.
- During the Civil War, the U.S. was unable to pay off all its debts using gold or silver. In 1862, paper money was declared to be legal tender, marking the first time a fiat currency (not convertible on demand at a fixed rate) was used as an official currency in the United States.
- In 1869, two Australians unearthed the world’s largest nugget of gold, the “Welcome Stranger,” which measured 10 by 25 inches before it was melted down.
- Olympic gold medals were pure gold until 1912.
- After the 1929 stock market crash, many investors started redeeming paper currency for its value in gold.
- 1931: The U.S. Treasury worried that the United States might run out of gold post 1929 stock market crash as investors redeemed paper currency for gold in increasing volume. It asked the Fed to raise rates. The rise in rates increased the value of the dollar and made it more valuable than gold.
- By 1932, speculators again turned in money for gold. As gold prices rose, people hoarded the precious metal. They sent prices up even higher.
- President Franklin D. Roosevelt outlawed private ownership of gold coins, bullion, and certificates in April 1933. Americans had to sell their gold to the Fed.
- In 1934, Congress passed the Gold Reserve Act. It prohibited private ownership of gold in the United States.
- When Franklin Roosevelt raised the price of gold from $20.67 to $35 in 1934, the dollar immediately lost 40% of its value.
- In 1937, FDR cut government spending to reduce the deficit. This reignited the Depression. By that time, the government stockpile of gold has grown to $12 billion.
- To keep up with the country’s mounting gold reserves, the United States Bullion Depository opened at the Fort Knox U.S. Army Garrison in Kentucky in 1937.
- 1944: Bretton Woods pegs the global price of gold. The day the price of gold was pegged to the U.S. dollar is one of the most important points of U.S. history.
- 1949: The U.S. Treasury held more than 70% of all nationalized gold, coinciding with America achieving financial and political preeminence worldwide in the following years.
- In the early 1970s, the Vietnam War caused the gold exchange standard to collapse. America’s budget was in ruin and in 1971, President Nixon suddenly decided to end the Bretton Woods system with a moment known in history as the Nixon Shock.
- When the United States stopped selling gold to foreign official holders of dollars at the rate of $35 an ounce in 1971, it brought the gold exchange standard to an end. On December 18, 1971 the President devalued the dollar.
- In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates.
- In 1974, President Ford repealed the prohibition on the public’s owning gold or engaging in gold transactions.
- In 1976, Nixon officially abandoned the gold standard altogether. Unhinged from the dollar, gold quickly shot up to $120 per ounce in the open market.
- The largest nugget still in existence is the “Hand of Faith,” found in 1980 in Australia.
- Switzerland was the last country whose currency was tied to gold. 40% of a Swiss Franc was backed by gold until Switzerland joined the IMF in 1999.
- The most expensive gold coin in the world is the 1933 Double Eagle, which was sold at Sotheby’s in New York in 2002 for $7.59 million.
- The heaviest modern gold bullion coin is Austria’s Philharmonic. In 2004, the coin, which has a weight of 1,000 ounces (31.1 kilograms or 69 troy pounds or 828 troy ounces) and a diameter of 15 inches, was dubbed the world’s largest gold coin by Guinness World Records.
- Every year starting in 2005 Russia has added to its gold reserves. It has also been the biggest driver in the trend of central banks adding to overall holdings of the metal.
- In 2007, Canada made a 100 kilogram (3,217 troy ounce), 0.99999 gold coin with a face value of $1,000,000.
- Gold shot up to $869.75 an ounce during the 2008 financial crisis. Starting in 2008 central banks have continuously added gold to their reserves.
- The world’s first gold vending machine was unveiled in May 2010. Located in an ultra-luxury hotel in Abu Dhabi, the vending machine itself is covered in 24-carat gold.
- According to a 2011 paper in the journal Nature, a meteor bombardment nearly 4 billion years ago brought 20 billion billion tons of a gold-and-precious-metal-rich space rock to Earth.
- The price of an ounce of gold hit an all-time record of $1,895 on September 5, 2011, in response to worries that the United States would default on its debt.
- A 2013 study in The Astrophysical Journal Letters found that all of the gold in the universe was likely birthed during the collisions of dead stars known as neutron stars.
- Earthquakes can create gold: A 2013 study in the journal Nature Geoscience found that during earthquakes, water in faults and fractures vaporizes, leaving gold behind.
- Before 2015, private ownership of gold was restricted in China. But from 2015, the Chinese government has privatized gold ownership.
- China was the top gold jewelry buyer in 2017, according to a GFMS gold survey.
- Central Banks purchased 11 million ounces of gold in 2017. Russia’s gold buying activities accounted for two-thirds of the total 10.95 million ounces of net gold buying by central banks during the year. Kazakstan, the next closest behind Russia, took 12.6% of the total (1.38 million.)
- Central bank gold purchases for the first ten months of 2018 were 351.5 tons, a 17 increase for the same period the year before.
- India imported 63.8 tonnes of gold in December 2018, and for the year 2018 imported 782 tonnes of gold. Between 1999 and 2018, India has imported a staggering 14,469 tonnes of gold.
- Bank of Russia added 6.2 tonnes of gold to its gold reserves in January 2019, putting its total gold holdings at 2118 tonnes. Expect Russia to buy at least 250 tonnes of gold in 2019, meaning it needs to ramp up purchases to an avg of 22 tonnes per month between February and December.
- Gold demand in China is off to a strong start in calendar year 2019, with physical gold withdrawals from the vaults of the Shanghai Gold Exchange (SGE) totaling 219 tonnes during January, on par with January gold demand in recent years. The Chinese central bank, the PBoC, announced the addition of 11.82 tonnes of gold to its strategic gold reserves in January 2019 and now claims to holds 1864 tonnes of gold.