Commodities, Conservation and Policy
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.
Gold as a commodity
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.