Is Gold Volatile?

You’re thinking about buying gold or precious metals, and then someone hits you with the most common challenge. They say something like, “Gold is volatile. You don’t want to invest in gold.” This article will explain why that’s not the case despite the price of gold being manipulated.

The “gold is volatile” myth has been repeated so many times that most people believe it, and when it is presented some people have a hard time proving why the “gold is volatile” adage is just not the case. If we look at historical data from the last thirty years, it is easy to prove that physical gold has been stable much more of the time than it has been unstable.

As an aside, did you know that the first discovery of gold in America happened in Cabarrus County, North Carolina where TreeceCo is located? Conrad Reed, a twelve-year-old boy, found a seventeen-pound gold rock on a Cabarrus farm in 1799 when he was fishing.

So if that were to happen today, how would you determine the value? If you were to dig an area to plant your spring garden and you found an ounce of gold, you would immediately want to know how much it is worth. This is referred to as the “spot price” of gold. The spot price is the value of unrefined gold when it found in the earth.

The spot price of gold on March 31, 1986 according to the London Fix was $414.75. For this illustration we will continually look at the end of March for what the spot price of gold was in the particular year discussed.

The price fluctuated from 1986 to 1996. However, when looking at every March for the next ten years it should be noted that the most it dropped was $77.75. On March 31, 1996 the price of gold closed at $396.35. The next ten years were the most volatile so far. The price in March 2001 dipped to $262.00 per ounce, but when looking at this ten-year window we will notice that by March 2006 the price per ounce of gold had increased to $565.00. As a visual aide refer to the chart below.

The price of gold from 1986 to 2016 according to London Fix pricing per ounce. 

The price of gold from 1986 to 2016 according to London Fix pricing per ounce. 

The next decade saw massive gains for the gold market. It increased to as much as $1,662.50 in March of 2012. Remember we are looking at the end of March from 1986 to 2016. The price went to $1,187.00 in March 2015, and at the end of March 2016 it was $1,237.00.

It is clear to see that gold has had positive upward momentum over the last thirty years. Yes, a debater could argue that the price is volatile, but it would be hard to make that argument if you look at ten-year blocks of time over the last thirty years. After all, the gold spot price has increased 66.3% over the last thirty years.

We do not advocate buying gold or any precious metals to make a quick buck. It should be part of your long-term strategy to hedge against inflation and to guard against the dollar losing value. However, despite banks like Deutsche admitting to rigging the precious metals market, it has still been a profitable place to earn money.

For reference below is a thirty-year snapshot of the performance of silver. Silver has been more volatile than gold, but for twenty years it remained very stable. Savers began waking to the functions of physical precious metals around the year 2006. This caused a major increase in the price of silver, but banks like Deutsche were not content to see their profits impacted. We believe precious metals are God's money and He will preserve their integrity. 

The price of silver from 1986 to 2016 according to London Fix pricing per ounce. 

The price of silver from 1986 to 2016 according to London Fix pricing per ounce.