Gold is back in vogue

Investment Analysis Clubs Macro Economic Trends and Risks
1

I know I said gold was down. I did privately think that could be a trading range. It was too early to consider gold down for the count.

I am very uncertain how gold in this environment will work with deflation. I do not know. Have not given it enough study.

2

The price of gold increased sharply in 1929 during the Great Depression as people bought gold to protect themselves from the stock market crash.

Explanation

  • In 1929, the price of gold rose from $20.67 to $35 per ounce.
  • This increase was due to people buying gold as a hedge against the stock market crash.
  • The Gold Reserve Act was passed in response to the price increase, requiring people to exchange physical gold for paper money.
  • Gold is often considered a safe haven during economic downturns because its value is stable and protected from inflation.
  • When worries about the economy increase, the demand for gold increases, which drives up the price.
  • During the Great Depression, the US central bank raised interest rates to slow down the economy and reduce the use of leveraged debt.
  • This led to a recession, which caused unemployment to increase.

The Great Depression was the most severe economic depression in history, lasting for a decade and impacting global markets.

3

In 1929, the USD experienced a significant decline due to the stock market crash, which marked the beginning of the Great Depression; the value of the stock market plummeted, wiping out billions of dollars in wealth and causing a drastic drop in the overall US economy, leading to a devaluation of the dollar.

Key points about the USD in 1929:

  • Stock Market Crash:

The major event impacting the USD in 1929 was the Wall Street Crash in October, where stock prices drastically fell, leading to substantial losses for investors and a decline in the value of the dollar.

  • Impact on Economy:

The crash triggered a significant economic downturn, causing widespread unemployment, reduced consumer spending, and a decrease in business investment, further impacting the dollar’s value.

  • Overall Decline:

Between September and November 1929, the stock market lost over half its value, resulting in a substantial drop in the value of the US dollar.

4

The currency touched a record low of $1.0327 in September 2022, and has recovered about 27% since then. However, it remains down about 38% from a record high touched in 2007 before the global financial crisis.Aug 23, 2024