A Short History of Gold

While Nixon’s move was imperative for the U.S. economy to continue expanding, it also ushered in a dark period for hard-asset investors that lasted for more than three decades. Although President Ford signed legislation in 1974 allowing private citizens to own more than token amounts of gold for the first time since 1933, it was cold comfort for skeptics of paper money: gold coins were expensive relative to their gold content, and bars were difficult to purchase and store. Gold could be owned through futures contracts, but they were highly leveraged and expired constantly, generating large trading costs. Shares in gold mining companies could be purchased as proxies for gold metal, but they tended to perform more like stocks than gold during a market crisis, and their use of hedging programs to counter declining gold prices further divorced their share price from tracking the market price for gold. Investor interest in silver was badly shaken by the Hunt brothers’ 1979 attempt to corner the silver futures market, while platinum trading tended to reflect industrial, rather than investor, demand.