The Balance
Gold and the Economy
  • Investing
    • Basics
    • Stocks
    • Real Estate
    • Value Investing
    • View All
  • Credit & Debt
    • Building Credit
    • Credit Card Basics
    • Reducing Debt
    • Reports & Scores
    • View All
  • Retirement Planning
    • Basics
    • 401(k) Plans
    • IRAs
    • Social Security
    • View All
  • Banking & Loans
    • Basics
    • Best Savings Account Rates
    • Getting a Loan
    • Online Banking
    • View All
visit our other sites
U.S. Markets
  • Commodities Market
  • Stock Market
  • Hedge Funds
    U.S. Markets Commodities Market

    Gold and the Economy

    • Share
    • Flip
    • Pin
    • Email
    By Kimberly Amadeo
    Updated June 14, 2018

    Gold has had a significant impact on the U.S. economy, from the gold standard to the price of gold. It depends on how safe other investments are.

  • 01
    How Gold Affects the Economy and You

    Gold's impact on the economy waxes and wanes, depending on how safe other investments are. When other investments seem too risky, gold always looks like a good hedge. In fact, you can tell how healthy the economy is from the price of gold. When the U.S was on the gold standard, the precious metal had an even greater importance. 

     

  • 02
    Gold Price History

    Before gold was used as coinage, its value was recognized. Gold jewelry is buried in the Tomb of Djer, king of the First Egyptian Dynasty. Gold's beauty, luster, and malleability made it perfect for many uses. In fact, the Egyptians became masters in the art of beating gold into leaf.

    Gold was first used for money in 643 BC. In 30 BC, the Roman Emperor Augustus set the price of gold at 45 coins to the pound. Its value has steadily increased since then, reaching a peak of $1,823 an ounce in 2011. The historical price of gold predicts it will again fall below $1,000 an ounce.​

  • 03
    Gold, "The Ultimate Bubble," Has Burst

    Was commodities trader George Soros right when he said: "Gold is the ultimate bubble"? Soros argued that gold, unlike housing, company stocks, or even oil, more easily lent itself to speculation because it has very little intrinsic value. That could mean the high prices in 2011 were a sign of an asset bubble. 

  • 04
    Three Reasons to Invest in Gold

    People invest in gold for one of three reasons.

    1. Offset stock market declines
    2. Hedge against inflation.
    3. Counteract a declining dollar.

    For these reasons, gold is often considered a safe haven investment. But is it really? Research from Trinity College shows that gold should be included in a well-diversified portfolio. It does protect your investments as a hedge after a stock market crash. But this protection is short-lived. 

  • 05
    What You Should Know Before Buying Gold

    When the price of gold shoots up, everyone wonders if they should buy it. Are you a good candidate for buying gold? Only if you have enough money to ride out any ups or downs that could last years. In fact, the higher the price, the riskier this commodity is. You never know when a gold boom will turn into a bust.

  • 06
    What Is the Gold Standard?

    The gold standard is when countries tie the value of their currency to gold. They are willing to redeem that currency for its value in gold. The gold standard allowed lightweight paper currency to be used for trade, instead of heavy gold bullion. In addition to making purses, and pockets, lighter, the gold standard allowed global trade. 

    During the financial crisis in 2008, many longed for a return to the gold standard. It seemed that money had lost all relation to anything concrete. But the very forces that pried America away from the gold standard also meant that a return would prompt massive deflation. It would be enough to throw the global economy into another depression.

  • 07
    History of the Gold Standard

    Gold was first used as a standard in 643 B.C. when the metal was used to create coins. Wealth was defined strictly by the amount of gold you had. Gold as money evolved from coins to paper redeemable by coins to a concept that was only loosely tied to its value in gold.

    The gold standard helped create the Great Depression. It was modified after World War II to make the U.S. dollar the de facto world currency. But President Nixon disbanded it in the 1970s.

  • gold-coins.jpg

    Gold, "The Ultimate Bubble," Has Burst

  • gold price history

    Here's Why Gold Will Drop Below $1,000 Again

  • gold standard

    When the Dollar Was Backed By Gold

  • Gold bullion, illustration

    The Pros and Cons of the Gold Standard, and Why We Can't Go Back

  • Gold dollar coins

    Why Brexit Sent Gold Prices Soaring

  • men grocery shopping

    Why Do Prices of the Things You Need the Most Change Every Day?

  • Gold bar overlaid on one hundred dollar bill

    What You Should Know Before Buying Gold

  • many-gold-coins.jpg

    3 Reasons to Invest in Gold According to Research

  • workers at an oil field

    What Makes Oil Prices So High?

  • Carbon Emissions Trading

    Could Carbon Emissions Trading Become the New Bitcoin?

  • couple at gas station

    Predict Tomorrow's Gas Prices Today

  • gas pumping determines oil prices

    3 Factors That Control Oil Prices

  • a cow laying in the grass

    How Commodities Trading Affects Food Prices

  • gas prices

    Learn Why Gas Prices Rise and What You'll Be Paying at the Pump

  • Women shopping for groceries

    5 Causes of High Food Prices

  • Forex trading is a $5.3 trillion a day business.

    What Market Trades $5.1 Trillion Per Day?

Our Best Money Tips, Delivered
You're in! Thanks for signing up.
There was an error. Please try again.
Facebook Pinterest Twitter Flipboard Linkedin
  • Investing
  • Credit & Debt
  • Retirement Planning
  • Banking & Loans
  • About Us
  • Advertise
  • Terms of Use
  • Privacy Policy
  • Cookie Policy
  • Careers
  • Contact
  • Editorial Guidelines
Also from The Balance Team
The Balance Small Business
The Balance Careers
The Balance is part of the Dotdash publishing family.
  • Lifewire
  • ThoughtCo
  • TripSavvy
  • The Spruce
  • and more