From Ancient Times to the Digital Age: The Enduring Value of Gold and How to Invest in It

Gold has been valued as a precious commodity since ancient times, but it wasn’t until around 550 BCE that it began to be used as a form of currency. The Romans started issuing gold coins in 50 BCE, and for the next two millennia, many countries and empires pegged their currencies’ values to gold. By the 19th century, the “gold standard” was established, where countries created paper currencies backed by their gold reserves.

In the Roman Empire, the price of gold was initially set by Emperor Augustus at 40-42 coins to the pound. Subsequent emperors debased the value of gold, leading to hyperinflation and economic instability. In Great Britain, the price of an ounce of gold was set at 0.89 pounds in 1257 and gradually increased over the centuries.

The United States adopted the gold standard in 1900, setting the value of gold at $20.67 per ounce. However, the defense of the gold standard contributed to the Great Depression, as the U.S. Treasury asked the Federal Reserve to raise interest rates to prevent the depletion of gold reserves. This led to an economic downturn and unemployment.

In response to the crisis, President Franklin D. Roosevelt outlawed private ownership of gold in 1933, requiring Americans to sell their gold to the Federal Reserve. The Gold Reserve Act of 1934 allowed Roosevelt to raise the price of gold to $35 per ounce, which lowered the dollar value and created healthy inflation.

The Bretton-Woods Agreement of 1944 made the U.S. dollar the official global currency, with the United States defending the price of gold at $35 per ounce. However, in 1971, President Nixon stopped the Fed from honoring the dollar’s value in gold, effectively taking the dollar off the gold standard.

Since then, the price of gold has fluctuated in response to various economic crises. It reached a new high of $1,917.90 per ounce in 2011 due to fears of a U.S. debt default and hit an all-time record of $2,016.58 an ounce in 2020 during the COVID-19 pandemic. As of early October 2022, the price of gold stands at $1,660.80 an ounce. Despite the detachment of currencies from gold, the precious metal continues to hold significant value today.

Gold continues to be regarded as a store of value and a safeguard against inflation, particularly during periods when fiat currencies are influenced by central bank monetary policies. Brandon Bonifacio, CEO of NevGold, a gold exploration company, asserts that gold and bitcoin share a common trait of decentralization, which enhances their appeal (See Brandon’s full interview here). Julien Davy, the CEO of Tarku Resources, a firm engaged in the exploration of gold, silver, copper, and lithium, among others, maintains that gold is a precious commodity that has retained its allure. He believes it will preserve its value well into the future, due to factors such as its limited supply (See Julien’s full interview here).

There are multiple avenues for investing in gold. One method is to purchase physical gold, such as in ounces, which subsequently necessitates storage. However, it’s important to note that buying physical gold does not yield any passive returns such as dividends. On the other hand, investor can earn returns by potentially selling the gold later at a higher price. Another strategy is to invest in gold ETFs, where you could potentially benefit from the fund being professionally managed, although returns are never guaranteed. A third option is to buy shares in gold exploration companies. This approach offers several benefits. Firstly, the cost is relatively low, as shares in gold exploration companies often only cost pennies to purchase. Additionally, these companies have the potential to yield returns in multiples of the initial investment. However, as with any investment, this is not always guaranteed.

If you’re contemplating investing in gold exploration companies, we recommend considering the following ones: Gold Line Resources Ltd. (TSXV: GLDL | OTC: TLLZF); NevGold Corp. (TSXV: NAU | OTCQX: NAUFF | FRA: 5E50); P2Gold Inc. (TSXV: PGLD | OTCQB: PGLDF); Tarku Resources Ltd. (TSXV: TKU | FRA: 7TK | OTCQB: TRKUF); and West High Yield (W.H.Y.) Resources Ltd. (TSXV: WHY).

Gold has upheld its status for centuries and is anticipated to retain its value in the foreseeable future. Factors such as reaching the peak of the monetary tightening cycle, among others, play a significant role in this projection. Even if gold is not the main commodity you invest in, it is wise to consider it as a part of your overall portfolio considering the risk mitigating factors it offers. Even hundreds of years after it was first used, gold remains a symbol of wealth and a key preservant of it. Ignore it at your own peril!