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The price of precious metals. When did gold become a safe haven? Is gold still considered a safe and/or stable investment in 2023?

The beginning of the Gold Standard
To understand why the price of gold did not change substantially until 1970, we must first understand what the Gold Standard or the so-called Gold Standard was.

The Gold Standard is a monetary system by which the legal currency of commonly used banknotes was supported by the reserve held in gold.

Almost all Western countries had already joined this system in 1800. So the value of the currency was tied to gold for a long period of time and, as a result, there were only small fluctuations in the price of gold.

In 1844, the Bank Charter Act stipulated that the banknotes issued by the Bank of England should be backed entirely by gold owned by it.
As early as 1834, the United States was backing its currency with gold, which was then worth $20.67, but this was not officially adopted until 1900, when Congress passed the Gold Standard Act of 1900 .

Abandoning the gold standard
Both during the world wars and during the Great Depression, the gold standard was abandoned as a monetary system by some states. In 1944, following the Second World War, the Bretton Woods system was established between the United States, Canada, Western Europe, Japan and Australia.

This agreement was designed to achieve relatively fixed exchange rates by pegging currencies to the value of gold.

The price of gold was allowed to fluctuate freely in the financial markets only when this system collapsed in 1970. Due to the gold standard, the price of gold did not fluctuate much between the 1790s and 1972, hovering around $20 until the 1930, when it rose to 30 dollars.

1970, the gold rush
The 1970s were a "crazy" period for the price of gold, with the yellow metal experiencing a remarkable bull run for the entire decade. Only when the US Federal Reserve, on the instructions of President Nixon, stopped supporting the value of the dollar depending on the gold reserve, did the Bretton Woods system actually collapse, effectively sanctioning the value of gold decided by the financial markets.

A historic ERA ended, however, the price of gold did not change substantially until 1973 when it reached $106, in part due to rising inflation in both the US and UK.

When did gold become a safe haven?
The combination of economic turbulences in the USA and Great Britain in the 1970s contributed to the "flight" for gold, being seen as a protection against inflation.

The price of gold reached a historical maximum in 1980 of 850 dollars, due to high inflation, high oil prices, but also due to geopolitical tensions, i.e. the Soviet intervention in Afghanistan and also due to the uncertainty caused by the Iranian revolution.

In the 1980s, both the US and Great Britain began to reduce inflation under the Reagan and Thatcher administrations, respectively. Gold fell to the $410 level and remained in this relatively stable trading range for a long time, eventually reaching $288.

Geopolitical events in the new millennium
By 2000, gold had fully established itself as a safe investment, so it's no surprise, given the political turmoil of the 2000s, that the price of gold experienced the fastest rise in modern history.

Following events such as September 11 and the invasion of Iraq in 2003, investors once again rushed to buy gold. This feeling was even more evident once the global economic crisis of 2008 hit the financial markets hard. Since then, both the speculation and the instability of the 2000s caused a bubble in the market, which caused a slight drop in the price of gold.

Currently, gold is considered a safe and stable investment, because it has low volatility. In 2022, it once again demonstrated the important role gold plays as a safe haven asset, already at the beginning of 2023 it shows that this role is being strengthened with a + 4% more than 2022 for investors in euros.

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