Keeping in mind the turbulence in the stock markets caused by the launch of DeepSeek in January 2025, the artificial intelligence model (AI) developed in China, find out how gold has reacted during the last hundred years in various episodes of economic and financial instability.
The value of gold tends to increase during periods of instability. This is a recurring phenomenon, as investors usually resort to gold as a safehaven asset to protect their capital. We present a historical tour in five acts that highlight how gold has proved its strength in key periods.
1. Oil Crisis (1973)
This crisis was caused by tensions between oil-producing countries and energy-consuming Western economies causing global economic stagnation and massive inflation. Gold’s price skyrocketed, from US $95 per ounce in November 1973 to more than US $180 per ounce In November 1974, an increase of 90% in just one year, thereby protecting investors from the financial collapse.
2. Dot-com Bubble (1999-2001)
When the technology bubble burst, a sharp drop in the markets was imminent. The Nasdaq lost about 78% of its value. Although the perception of security led to the purchase of US Treasuries, their yield decreased. The decrease was significant, going from a 6% performance in 2000, to less than 3.5% in mid-2001.
On its part, even though gold’s price had an initial drop of 16%, passing from US $310 per ounce in October 1999 to US $260 per ounce in April 2001; by the end of 2002, it had already recovered the lost ground and started a solid upward trend that continued for the next 5 years, reaching US $800 per ounce in December 2007. A return of more than 150% in 5 years, offering an alternative to the technology stocks and the weak performance of the Treasury bonds.
3. Crisis Financiera Global (2007-2009)
During the global financial crisis at the beginning of this century, major stock indices, such as the S&P 500, fell more than 50% from their pre-crisis highs. As stock markets began to show signs of stress, investors reacted with a clear risk-averse stance, resorting to gold as a safehaven.
In this context, gold’s price went from US $800 per ounce in December 2007 to US $975 per ounce in May of 2009, an increase of 22% in 17 months, consolidating itself as a protector of the purchasing power against inflation and the depreciation of the US currency.
4. European Debt Crisis (2010-2012)
The European stock markets were hit by political instability and fears of default from countries such as Greece, Spain and Italy. This increase in uncertainty in the eurozone drove an increase in the demand for gold by Central Banks.
Although it fluctuated, gold’s price remained strong during this period, going from US $1,100 per ounce in January 2010, to surpassing US$1,800 per ounce in August 2011, an increase of 64% in less than 2 years. Investors sought security and diversification in the face of the instability of the global financial system, a security that gold provided.
5. COVID-19 Pandemic (2020)
The COVID-19 pandemic generated a significant global recession. Even though the stock market saw a sharp initial decline in March 2020, stocks quickly recovered due to unprecedented fiscal and monetary stimulus policies, measures that would later cause a foreseeable inflationary phenomenon.
Simultaneously, bond yields plummeted, falling to historic lows and even coming to offer negative rates in some countries such as Switzerland, which raised concerns about the effectiveness of this type of instrument as a safehaven. In this context, gold’s price reached a new historical record by increasing its price per ounce from US $1,520 at the end of 2019 to US $1,970 in July 2020, an increase of 30% in just 7 months. This was due to the combination of global uncertainty, the massive emission of money in the main economies and global fears of inflation.
Gold Shines When Economies Don't
How has responded gold in the face of financial crises? As we have seen, it is clear throughout the (more and more recent) economic and financial crises, gold has proven to be a safehaven, preserving its value in times of instability. Historically, gold has been a reliable saving and investment instrument in the long term, for its stability and its ability to protect the capital during periods of high volatility.
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