What is a Bullion Market?
At the beginning of the 19th century, there were plenty of rich gold resources found in Russia, the United States, Australia, South Africa and Canada respectively. To promote the free flow of trade between imperial powers, the “Gold Standard Period” began as people started using gold as their primary currency for international settlement. Freely convertible, gold could be exported as an equivalent use of local currency.
At the end of the 19 century,most of the major countries in theworld launched the “gold standard”. Until the outbreak of World War I in 1914, it had already been implemented in 59 countries including the United States.Gold could be a freely convertible to different currencies under a strictly controlled official government market. Before World War I, the London gold market became the only international gold market.
Due to the impact of the global financial crisis in 1929, The Great Depression, governments from different countries strengthened their trade control by prohibiting free trade. Subsequently, British and the American governments officially abandoned the gold standard based on converting gold to local currencies.
The Period of the Bretton Woods Agreement
After the outbreak of World War II, the United States became the biggest beneficiary of the war and possessed more than 75% of the world's official gold reserves. In 1944, Britain, the United States and the representatives of 44 countries of the United Nations convened at a meeting in Bretton Woods, United States, signing the Bretton Woods Agreement. From there, gold was listed as part of the international monetary system as a method of international method of exchange. The U.S. government convened to peg the value of gold at US$ 35 per ounce.
With the “The Bretton Woods Agreement”, the U.S. dollar was centered at the International Monetary System which meant that the U.S. dollar became as valuable as an equivalent weight of gold. With the Bretton Woods Agreement, the U.S. government was obligated to convert the number of US dollars to an equal and certified amount of gold. Exchanging gold with only U.S. dollars meant that different countries could only conduct international transactions with gold. It is due to this restriction that U.S.dollars became a major reserve currency and a means of international settlement between various countries.
In 1944-1945, according to the Bretton Woods agreement, the World International Monetary System and the International Monetary Fund was established.
In 1968, the United Stateswas plunged into the Vietnam War. With a growing fiscal deficit, decreasing exports, tax revenues, increasing global competition and increasing prices in raw materials,Inflation in the U.S. could not be suppressed andit was widely expected that the US dollar was about toexperience a sharp depreciation.Since various countries converted U.S. dollars to gold with the U.S., it became increasingly difficult for the U.S. Government to live up to its commitment to maintain the fixed exchange rate between US dollars and gold.
In December 1971 representatives of the ten most industrialized nations met in Washington D.C. It was their express purpose to take whatever measures in order to improve international economic conditions. The now famous Smithsonian Agreement accorded an immediate hike in the value of gold from $35 to $38 per ounce. Unfortunately, it resulted in a measure too little and too late. International economic conditions continued to deteriorate, forcing the U.S. Government in 1973 to devalue the dollar a second time by raising the official price of gold to $42.22 per ounce. Finally, all international currencies were allowed to “float” freely against gold. By June of that year the London Gold Fixing had risen to an unprecedented $120 per ounce. Exploding demand during the following months set the stage for the creation of gold futures trading on the COMEX in January 1975.
Contemporary History of Gold
|In 1973||The Bretton Woods System collapses, and the period of free trading of gold commences. Gold imports were openin the same year in Japan, and the gold market in Singapore was open to the public.|
|In 1974||The gold market in Hong Kong was opened and gold futures contracts were listed on the COMEX. In the following year, the U.S. government announced that peoplecan freely possess gold and trade gold. Meanwhile gold futures and spot gold market officially opens.|
|In 1978||The IMF announced that gold was no longer a standard for currency pricing; abolished the official price of gold and the provision that the IMF must be paid in gold.|
|In 1979||Due to the global political unrest,the incident that certain Americans were taken hostage in Iran in November, and the Soviet invasion of Afghanistan in December, gold prices have rocketed from US$ 240/ounce to US$ 500/ounce.|
|On 21Jan1980||The price of gold increased to an unprecedented level of $US 850/ounce but quickly fell below US$ 500 after two months.|
|In Sept 1980||During the outbreak of the Iran-Iraq war, gold pricessurged. After reaching the price of US$ 700/ounce, the gold price sank all the way down because of the high interest rates in various countries.|
|In 1982||Tokyo Gold Exchange was established. Gold prices fell below US$ 300, but in the same year, Mexico technically ceased to settle external debts, and the gold prices rapidly rose above US$ 500/ounce.|
|In Feb 1985||Due to a stronger U.S. dollar, the gold prices sank below US$ 300.|
|In 1987||The U.S. Dollars illustrated the trade deficit, sharp depreciation against major currencies. The stock market crashed in October that year, while in December the gold price temporarily rocketed to US$ 500.However, since then the gold price dropped all the way down.|
|In Aug 1990||During Iraq’s invasion of Kuwait, Gold prices went up to US$ 400/ounce.|
|1996-1999||The gold price sank all the way to the bottom, and in 1999, Gold price sank as low as US$ 252.8/ounce.|
|In 2001||In the aftermath of 9/11 and due to the outbreak of the U.S.-Iraq war, the Gold price was expected to increase,begins to approach US$ 300/ounce.|
|In 2002||The gold price exceeded US$ 300/ounce.|
|In Dec 2003||The gold price exceeded US$ 400/ounce.|
|In 2004||The Washington Agreement limited the annual gold sales of central banks in various countries to 500 tonnes.|
|In 2005||The gold price fell below US$ 500/ounce.|
|In 2006||Gold prices rose above US$ 600/ounce. Futures and Options on RTS (FORTS) introduced the small-scale gold futures contract, quickly becoming the world's fifth largest gold market, following London, Switzerland, the United States and Hong Kong.|
|In Aug 2007||The U.S. subprime mortgage crisis broke out and the Gold prices in September exceeded US$ 700. Gold prices in November rose to over US$ 800 per ounce.|
|In 2008||Gold prices exceeded US$ 900/ounce, a new record high.|
|In 2009||The financial crisis centered in the United States continued to spread by weakening the global economic recovery. With a weak global recovery and a weakening US dollar,Gold prices rose to US$ 1,200/ounce.|
|In 2010||Gold prices reached a new high, pricing at US$ 1,400/ounce.|
|In 2011||With the European Debt Crisis culminating to the Sovereign Greek Debt Crisis and with Standard & Poor’s reducing U.S.’s long-term sovereign credit rating, the gold price continued to rise and the highest price exceeded US$ 1,900/ounce.|