This Day in History

On January 14, 1980, the U.S. federal government released the formerly fixed price of gold and it soared to unprecedented levels of value, exceeding a record-braking $800 per ounce. In order to understand how and why this happened, a little history lesson is necessary.

Gold Standard as a Way to Stabilize Currencies

Before the 1800s, most countries had currency systems relying on silver and gold for their value. In 1821, Great Britain began offering a fixed amount of gold for a fixed amount of currency. England thought this move would help to stabilize its economy, which was rapidly growing at the time. Most industrialized countries followed suit and adopted what became known as the gold standard. This offered a lot of stability to foreign exchange rates and helped to stabilized the international economy as a whole.

Gold Standard Comes to an End

In 1914, World War I caused the U.S. to temporarily recall the gold standard, but it returned after the war concluded. Furthermore, in the 1920s, many nations repealed the gold standard and started to supplement their cash reserves with more stable currencies like the U.S. dollar and the Great British pound. Due to the economic success of the United States and Britain, these nations' currencies had developed a kind of permanent abstract value which was not that different from gold.

Next, in the 1930s, the global economy collapsed and most countries around the world limited the convertibility of their paper currencies into silver and gold. Also, President Franklin D. Roosevelt made the circulation of gold coins illegal in the United States. Nevertheless, the gold standard stuck in the U.S. and the dollar and certain other foreign currencies continued to track gold into the 1970s. This is when gold reserves became too low to support the gold standard in the U.S. In 1974, the 40-year ban on buying gold was lifted in the United States. In 1978, the gold standard came to an official end and the value of gold began to climb.

How High Did Gold Climb?

By January 14, 1980, gold experienced an impressive jump in value to over $800 per ounce, and the price of gold has gone up and down considerably since then. In September 2011, it reached a record value of nearly $1,900 an ounce. However, it has since dropped and, as of Jan. 14, 2016, according to sources, an ounce of gold costs about $1,073.