KrassimirPetrov1 Gold Crisis Analysis

8/8/2019 KrassimirPetrov1 Gold Crisis Analysis

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GOLD

Crisis AnalysisBy

Krassimir Petrov, Ph. D.The American University in Bulgaria


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.

2. Economic

. nanc a

4. Banking 5. Currency

. 7. Crude oil


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1. 1929 Great Depression

2. 1971 The Collapse of Bretton Woods The Dollar Crisis

3. 1973 Yom-Kippur War, First Oil Crisis

4. 1979 Iranian Hostage Crisis, Second Oil Crisis

.

6. 1987 Stock Market Crash

7. 1993 No Identifiable Crisis

8. 2001 Terrorists Attack WTC, 9/11 Crisis

9. 2003 Iraq War

10. 2007 Subprime Crisis


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. Gold price was fixed

Stock, bond, real estate, and commodity markets collapsed Gold outperformed all asset classes


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August 15, 1971 Nixon cuts USD convertibility to gold

Gold had been manipulated by the London Gold Pool (1965-1968) Two-tier gold market

Gold Price rose from $35 to 45 by the end of 1971


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1973 Arab-Israeli War = Ramadan War = Yom-Kippur War = October War

1973 war operations - October 6-26

1973, October 17 OPEC Oil Embargo

Gold prices rise to 170

By the end of the crisis, gold oil ratio went up from about 11 to 33 o pr ces rose rama ca y esp e a ma or econom c recess on


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Crude Oil Prices


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1979 Oil Crisis = Second Oil Crisis

Pre-Iranian Revolution, Iranian Protests and supply disruptions

Widespread panic exacerbated oil shortages

1980 Iraq invades Iran, exacerbating

Gold price rises from $170 to $850 (mid 1978 Jan 1980)

Oil prices skyrocket ($15-$40); gold outperforms oil

U.S. economy falls into a deep recession


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- 1970s rapid accumulation of debt throughout Latin America

1980s Debt Crisis 1981-1982 (Argentina, Chile, Uruguay)

Tight Liquidity

Capital Flight

Currency Run Currency Crisis

1982 Contagion

Mexico defaults

Bankruptcy fears for major US banks


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- 1986-1987 pronounced USD weakness

Gold rises from $340 (mid 1986) to $481 (10/19/1987 = Black Monday)


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Sep 11, 2001 terrorist attack on the U.S.

Markets are closed for almost a week

Most markets collapse the next week

On the next day gold rises to $287

As the crisis subsides in a month, gold price retreats to $275


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2003 March Iraq War = Second Gulf War = Operation Iraqi Freedom

War Ramp-up Gold rises from $320 to $380 (Dec 2002 Feb 2003)

War Escalation Gold rises from $330 to $430 (Apr 2003 Dec 2003)


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Credit Crunch = Liquidity Crunch + Capital Crunch

Financial Instability

Crisis exacerbates in early Nov, Jan, Mar gold spikes on each


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Gold oftentimes forecasts crises -

Gold keeps rising as crises exacerbate

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KrassimirPetrov1 Gold Crisis Analysis