For the benefit of this article, the price of gold is stated as per gram, not per kilo. Most people track the price that way anyway (unless they’re from the US, in which case they use ounces).
Late 2008–late 2011: The wild increases
If you bought gold at its lowest price in 2008 and sold it off at its highest peak in 2011, you would have made a fortune.
Gold prices increased by more than 100% in those three years, from RM82.97 per gram on Oct 30, 2008 to RM181.38 per gram on Sept 20, 2011.
Steady increases in gold prices were considered normal, even expected for gold until that point in time. Save for minor dips, gold prices have only climbed in the previous decades, so what else is new?
That’s part of the reason why Gen X tends to love gold so much – it gives dependable returns on investment most years.
2011, in particular, was a memorable year for gold. The price rose more than 30% within one year, from RM135.39 per gram on Jan 5, 2008 to RM181.38 per gram on Sept 20, 2011.
While investors were naturally overjoyed, some cautioned about it being a bubble. The demand is too much, too soon, they said. It’s not sustainable. They were right.
Late 2011–early 2013: The gold market tries to maintain itself
During the late 2011 to early 2013 period, the gold market tried its hardest to maintain its high prices. It was a tumultuous two years, full of ups and downs.
Here’s a snippet in Quarter 4 of 2011 alone:
• Sept 20, 2011: RM181.38 per gram
• Oct 4, 2011: RM166.28 per gram
• Nov 15, 2011: RM180.05 per gram
• Dec 27, 2011: RM162.28 per gram
The swings continued in 2012, when gold prices dipped to RM154.11 per gram on May 15, 2012 before bouncing back to RM173.93 on Sept 18, 2012. For a while, investors thought they had nothing to worry about.
After all, gold prices still followed long-term historical patterns. Short-term dips in gold prices were not uncommon, and always temporary up until then.
Price history and optimism wasn’t enough to sustain gold prices after all. It fell to RM135.36 per gram on April 16, 2013.
Mid-2013–Mid-2015: Testing the lows
By June 27, 2013, gold prices bottomed at RM123.32 per gram. It practically reversed the gains in the last three years.
Simply put, if you bought gold in mid-2010 and sold it off in mid-2013, you wouldn’t see much, if any returns on your investment at all.
This was highly unusual behaviour for gold up to this point. There has been no equivalent precedence; it never behaved this way, historically speaking.
In mid-2013 until mid-2015, gold prices mostly hovered between RM130-RM140 per gram, except for the few times it tried but failed to break higher.
Late 2015-mid-2018: A comeback?
While only time will tell, it appears that gold prices might be making a comeback.
Gold has had small but steady increases in price from late 2015 until mid-2016, and has been trading between RM160-RM180 per gram ever since (Note: this article was written in May 2018).
Causes of the price movement
Simplistically, the prices of all commodities reflect market sentiment. Because gold is treated as a hedge against other riskier types of investment vehicles, investors tend to buy gold if they are not confident with stock markets, and vice versa.
There are complex analysis-type reports relating gold’s performance in relation to the world economy, including but not limited to trade agreements and strength of fiat currencies between nations around the world. Those are separate (and lengthy) discussions on their own.
That’s the big picture. But what does the historical price movement mean to the average, individual investor? What does all this mean to you?
What investors can learn from historical gold prices
The primary takeaway is that gold has maintained its status as a “safe” investment vehicle. Gold has shown perseverance, even through market dips.
You can’t say the same about some other types of investments, like stocks. The hardest-hit stocks in the “dotcom bubble” never recovered and wiped out all of their investors’ money with them.
In comparison, gold prices in mid-2018 have returned to 2012-levels, signalling investors’ continued confidence in gold as a store of value for the long-term.
The secondary, but equally important takeaway for investors is to be aware of herd behaviour. Gold’s amazing performance in 2008-2011 caused a gold bubble, which popped in 2013.
During those bullish years, gold prices were constant headlines in the business and investment sectors. It attracted a lot of attention, which in turn attracted more investors to buy gold. As you can see, that didn’t last.
As we’ve seen with gold, and more recently bitcoin and cryptocurrencies, hype is great for the short-term but can be unsustainable. In a way, the safest time to buy into a sound, solid investment is when there is little coverage about it in the media.
This article first appeared in ringgitohringgit.com
Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.