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Commodities, Conservation and Policy

Gold as a commodity

Gold has been one of the most reliable stores of value in recorded history. A rare and precious metal, it is has been valued for its beauty. Long known as a simultaneously hard and malleable metal, it was also found to be a very good conductor of electricity in modern times. For much of the 20th century it formed the basis of monetary policy.
About the Gold Standard
Bloomberg on gold reaction to stock prices, Aug. 2, 2007
Recent gold market activity, including 2006 high
Gold $832 in Jan., 1980
Gold/oil ratio

The price of gold rises in times of uncertainty. For example, in late July and early August, 2007, gold rose to $684 when the stock market fell from its record heights over concerns about credit problems and economic growth.

However, this recent rise is but a wavelet in the volatility of the commodity. In May, 2006, gold hit a 25-year high of $732 per ounce. However, two months after the Iranian hostage-taking and one after the Soviet invasion of Afghanistan, gold futures hit an all-time record of $832 in January, 1980. (Adjusted for inflation, that would be $2,103 in 2007 dollars.) That record not only reflected political instability, but also very high oil prices. There has been a very strong positive correlation between the price of gold and oil, though the strength of that relation as expressed by the gold/oil ratio, has varied considerably. The price ratios are readily measured, but the political factors are not so easily quantified.

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