It’s late summer in 2011, and the price of gold today is up $55 per ounce from its price yesterday, an all-too-familiar pattern that has been hitting the financial news in recent weeks. Each day that goes by seems to bring a new all-time high for the price of gold. However, to talk about the price of gold today, first we must look at the price of gold from a historical perspective. And to do this, it is necessary to understand the basic premise of the gold market itself. Gold prices constantly readjust themselves relative to how many United States dollars or British pounds sterling–known as flat currency–it takes to purchase an ounce of gold.

Gold prices did not fluctuate much from the time the gold standard was set by Sir Isaac Newton in 1717 until the Great Depression in the 1930s, when the price of gold suddenly doubled. The United States federal government responded by making it illegal for the private individual to buy gold, except in the form of jewelry, and by setting and fixing the official price of gold at $35 per ounce. This regulation of the price of gold kept the economy stable for awhile, but as flat currency began to be supported less and less by gold, the era of the official gold standard was drawing to a close.

With the end of the gold standard, the price of gold was free to rise and fall without limitation. The economy took a turn for the worse as the federal government gave permission to the US Mint to print as much money as it needed — and gold prices started their steep upward climb. As more money was printed, its inherent value decreased, a phenomenon known as inflation.

The price of gold today behaves just like that of any other commodity, free to fluctuate totally dependent on supply and demand. The demand for investment gold has been increasing in recent years, causing gold to steadily increase in value. This trend is likely to continue for as long as the current global recession continues, making sudden increases in gold’s price a common scenario.