You could say that the last bull market for gold began on August 15, 1971, when the President of the United States, Richard Nixon, “closed the gold window”. In fact, it removed the United States and the world from the last vestiges of the gold standard. Private individuals were banned from owning gold in the United States for decades. This was followed by a crazy bull market for precious metals with a sudden end.
The world is once again facing stagnant economic growth, but inflation is not the problem: deflation or falling prices are a real possibility. This, combined with its limited availability, means that gold was also used to support currencies, especially under the new Bretton Woods monetary system introduced after World War II. In 1971, the United States finally decoupled the dollar from gold (the “Nixon shock”) and, in 1973, the Bretton Woods system came to an end. The current upturn in gold has some notable similarities with what happened with gold prices in the 1970s.
If every ounce of this gold were put together in a large cube, each side would measure approximately 21 meters. When the ban on gold in the United States was lifted in late 1974, the price had risen to nearly 200 U.S. dollars. At a price of 1519 U.S.
dollars per troy ounce (about 31.1 grams), this cube would be worth 9.65 trillion U.S. As we have repeatedly said, it is prudent to keep gold and gold stocks as part of a diversified portfolio. Gold reached its all-time high in January 1980, two months before the start of the hostage-taking at the United States embassy in Iran. This is where gold investors lose touch with economic reality and pursue ever higher prices in a feedback cycle of sky-high prices, “new-age thinking” and greed.
However, in a world of NIRP, at least gold doesn't guarantee a loss, unlike some government bonds that guarantee that you'll receive less money than you invested. In his 1969 article “Speculations on Gold Speculation”, the well-known economist Fritz Machlup concluded that the price of gold, of 35 US dollars per troy ounce, which was applied in Bretton Woods, would decrease significantly if government demand ceased to exist. The confidence crisis of the 1970s reached its boiling point in 1979, when, not by chance, gold rose. The wild 1970s and the subsequent falls in the price of gold have been etched in the memory of many investors.