InvestorQ : Can you explain why the gold prices had a huge bull rally in the 1970s?
Dia Deshpande made post

Can you explain why the gold prices had a huge bull rally in the 1970s?

Answer
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Ria Jain answered.
1 year ago


For a precious metal that is one of the most demanded commodities in India, gold prices are still largely driven by global factors. In fact, the jewellery demand in countries like India and China can at best act as a support for gold prices. They cannot really drive the price of gold up; or even down. The major movements in gold prices in the last 50 years have happened due to the interplay of global factors. Let us take the example of one of the biggest bull runs in gold. In 1971 when the US pulled out of the gold standard, gold was quoting at $35/oz (1 oz = 31.1025 gram). Between 1971 and 1980, the price of gold moved up from $35 to a whopping figure of $900/oz. This remains the greatest Bull Run ever seen in gold. The big bull rally in the 1970s had a few distinct reasons. The decade began with the Bretton Woods system of gold standard breaking down. That took of the dollar peg which was holding back gold from depreciating. Actually that massive gold price rise was a signal of dollar depreciating indirectly. The decade was one of tremendous geopolitical tumult. Middle East was racked by the Yom Kippur war which was followed by the Arab Embargo on oil exports to the US. The decade long war between Iran and Iraq also started during this period and towards the end of the decade, Russia invaded Afghanistan leading to accentuating of the cold war between the US and the USSR. All these events led to the massive rally in the price of gold.