WO R LD G O L D CO U NCI L

GOLD AS A STORE OF VALUE

By Stephen Harmston

Research Study No. 22

GOLD AS A STORE OF VALUE
Research Study No. 22 November 1998

WO R LD G O L D CO U NCI L

CONTENTS
EXECUTIVE SUMMARY ..............................................................................3 THE AUTHOR ..............................................................................................4 INTRODUCTION..........................................................................................5 1 FIVE COUNTRIES, ONE TALE ..............................................................9 1.1 1.2 1.3 1.4 1.5 2 UNITED STATES: 1796 – 1997 ..................................................10 BRITAIN: 1596 – 1997 ................................................................14 FRANCE: 1820 – 1997 ................................................................18 GERMANY: 1873 – 1997 ............................................................21 JAPAN: 1880 – 1997....................................................................24

THE RECENT GOLD PRICE IN RELATION TO HISTORIC LEVELS....28 2.1 2.2 THE AVERAGE PURCHASING POWER OF GOLD OVER TIME ................................................................................28 DEMAND AND SUPPLY FUNDAMENTALS ............................31

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TOTAL RETURNS ON ASSETS ..........................................................35 3.1 3.2 3.3 3.4 3.5 CUMULATIVE WEALTH INDICES: BONDS, STOCKS AND GOLD IN THE US 1896-1996 ....................................................35 COMPARISONS WITH BRITAIN ..............................................38 LONG-TERM GOVERNMENT BONDS IN FRANCE ................40 TIMES OF CRISIS ......................................................................40 A MODEL OF HISTORICAL TRADING IN GOLD, BONDS AND STOCKS ............................................................................41

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GOLD AS A DIVERSIFIER