How Gold Worth Per Ounce Can Be Swayed By Political Instability

[baqirkhatri]

For centuries, gold has been hoarded and treasured as the ultimate guarantee of wealth and prosperity and today, gold worth per ounce is seen as the most accurate barometer of the state of the world's finances. When wars or revolutions threaten, investors move their nest eggs into the relatively safe sanctuary of gold. This usually pushes the gold price up the chart, sometimes to peak at record-breaking highs.

One good illustration of how gold performs when during times of political strife has to be the 1979 revolution in Iran. At the start of the year, gold opened at a relatively inconspicuous $226. 80. It did not see much upward or downward mobility in the first month, but the scenario changed radically in February 1979, when the ayatollah Khomeini landed in Tehran after his exile in Paris. Gold leapt a few dollars from $230. 30 to $243. 10, and commenced on a slow, steady ascension. By June of that year, it saw $280. 00 and on 18 July it broke through the ceiling of $300. Briefly, the noble metal's value fell back to the high $200s, but August saw it stabilizing above $300. 1 3 cup to oz

After this prelude, September 1979 turned out to be a month of fireworks as gold broke new ground and reached the high of $380. 00 in the third week of September. That month had seen some turbulence in the form of an assassination in France, a change of government in Afghanistan, several nuclear tests by the USSR, China and Israel and last but not least, Iran's revolution dragged on. October's arrival was heralded by another psychological barrier shattering, that of $400 per fine ounce. Gold slipped slightly in November, but as December arrived, gold rose with new vitality. By New Year's Eve the unbelievable high of $512 had been reached.

January 1980 saw gold scale greater heights. The first day of trade already had it settling at $559. 50 in London, but the following day the noble metal closed on $634. 00. It had jumped well over ten percent in one day's trading. The triumphant climb continued. Halfway into January, it touched on $760. 00 and then pushed all the way up to $850. 00. That was to be the pinnacle. Those who had invested in gold, had reason to celebrate. January closed with a drop back to $653. By the end of 1980, gold had settled back to $589. 75.

This spectacular peak can perhaps be explained by looking at the political movements of the months that went before. After months of unrest, the Ayatollah Khomeini officially took over the governing of Iran. This coincided with an attack on the American consulate in Iran and the commencement of a hostage drama that was to last longer than a year. The next month, December 1979 saw the Soviet invasion of Afghanistan, which drew a round of fiery condemnations from the West.

The political events that created a climate of uncertainty played a deciding role in driving investment funds to favor gold. It made a good demonstration of the link between world events and gold worth per ounce.