May 6th 2014
page 7
GLOBEONOMICS
Is the Olympic medal worth its weight in gold
and how has the gold boom occurred?
The last Olympic medal made purely of
gold was at the 1912 Stockholm games.
Then the price of an ounce of gold was approximately $18.93 meaning the medals
cost just $14.58 to produce.
So why has the price of gold skyrocketed so
high?
As usual it’s a simple system of supply and
ith the Winter Olympics having passed demand. In this case it is the drive in deand Team GB reaching a medal haul equal mand that has led to the dramatic rise in
to that achieved in 1924 it has truly been a the value of gold from about £250 in the
successful games. However, was the medal 1980’s to almost £1100 today. (source 2)
Gold has always been a safe investment,
hall worth the £14 million invested by UK
however, since the credit crisis of 2007 and
Sport?
onwards people have believed that it is safWell, in terms of monetary value it must be er to invest in gold rather than currencies.
said that this hasn't been the case. Especially with team GBs single gold medal.
The gold alone is worth just £155 in the
current market, with only 6 grams of gold
being used on a single medal, costing Sochi
£65,000 for the sum of gold used. On the
other hand, if each medal was made of
pure gold they would cost a whopping
£13,650 each and total £18 million. It’s not
Source 2
quite Rooney’s £300,000 a week, but its
still a nice bonus for any athlete.
Sadly for Britain, Gordon Brown decided to
It must be said that the games bring other sell half of the UK’s gold reserves during
positive externalities such as increased
the 20 year low of 1999 to 2002. This is
interest in sports. After watching the
estimated to have cost the UK tax payer a
games, people are stimulated to try out
sum of £9 billion. Nevertheless the quessports, inspired by athletes, who become
tion still remains, will demand for gold
models for that sport, therefore increasing continue to rise, or have absurd prices
demand.
gone too far?
W