17·Gold 367 audit has been conducted since 1950 by the treasury department. Moreover,it is said that the gold in Fort Knox is mostly only 90% pure because it is derived from gold coins which went out of cir- culation in 1930.(Source:www.fgmr.com). Gold is used as a means for international payment.As a result, the price of gold fluctuates with the value of the currency of a given country and due to international political events.For ex- ample,gold prices started to rise in 1973 because of the begin- ning of the OPEC oil embargo,and then again starting 1978 due to the increases of gold purchases of Middle Eastern investors as a consequence of upheavals in Iran(US hostage taking)and the invasion of Afghanistan by the Soviet Union a year later(see Fig- ure 17.1).On the other hand,gold prices declined during 1981 and 1991 caused by the conflict in the Persian Gulf,the break- ing up of the Soviet Union,the erosion of gold's role as a safe haven for investors,and worldwide weak economic growth.De- spite of this,the world gold production has steadily increased during the past 100 years(Figure 17.2)probably due to increased industrial uses(computers)and demand for jewelry. It may be argued that a gold-backed monetary system func- tions only as long as the cost of production of gold,and thus its 1,200 1.000 -1992 dollars Current dollars 800 eIIOd 600 400 200 0 1968 19711974'1977198019831986'1989199219951998 Year Figure 17.1.Annual average gold prices in US for one troy ounce of gold.(1 troy ounce =31.1 g;1 "common"ounce 28.35 g).The upper curve adjusts the current price to the unit value in constant 1992 US dollars (correction for inflation).Compiled by E.B.Amey,US Geolog- ical Survey,Minerals and Materials Analysis Section (eamey@usgs.gov).audit has been conducted since 1950 by the treasury department. Moreover, it is said that the gold in Fort Knox is mostly only 90% pure because it is derived from gold coins which went out of cir￾culation in 1930. (Source: www.fgmr.com). Gold is used as a means for international payment. As a result, the price of gold fluctuates with the value of the currency of a given country and due to international political events. For ex￾ample, gold prices started to rise in 1973 because of the begin￾ning of the OPEC oil embargo, and then again starting 1978 due to the increases of gold purchases of Middle Eastern investors as a consequence of upheavals in Iran (US hostage taking) and the invasion of Afghanistan by the Soviet Union a year later (see Fig￾ure 17.1). On the other hand, gold prices declined during 1981 and 1991 caused by the conflict in the Persian Gulf, the break￾ing up of the Soviet Union, the erosion of gold’s role as a safe haven for investors, and worldwide weak economic growth. De￾spite of this, the world gold production has steadily increased during the past 100 years (Figure 17.2) probably due to increased industrial uses (computers) and demand for jewelry. It may be argued that a gold-backed monetary system func￾tions only as long as the cost of production of gold, and thus its 17 • Gold 367 Figure 17.1. Annual average gold prices in US $ for one troy ounce of gold. (1 troy ounce = 31.1 g ; 1 “common” ounce = 28.35 g ). The upper curve adjusts the current price to the unit value in constant 1992 US dollars (correction for inflation). Compiled by E.B. Amey, US Geolog￾ical Survey, Minerals and Materials Analysis Section (eamey@usgs.gov). 1,200 1,000 800 600 U.S. Dollars 400 200 0 1968 1971 1974 1977 1980 1983 Year 1986 1989 1992 1995 1998 1992 dollars Current dollars