After Silver and Gold: Some Sober Thoughts on Speculative Bubbles

Recent months have witnessed a seeming madness in many of the world’s financial markets. Following the crises in Iran and Afghanistan, investors appeared to be moving out of dollar assets and into precious metals. The prices of silver and gold soared. Gold had been selling for less than $200 per ounce in the beginning of 1979, yet its price climbed to over $800 per ounce one year later. On January 21,1980, gold peaked at a closing price in London of $850 per ounce; two mornings later, it “crashed” to $650 per ounce. The downward trend continued until gold reached its 1980 low point of $480 per ounce on March 17; the price of gold has since hovered close to $520.