Throughout history, gold has been valued as a sign of prestige and status. The ancient Egyptians loved its malleability and used it to gild their pyramids. The more gold used, the greater a person’s importance. The Egyptian Menes saw the economic advantages of using gold and silver to barter for goods. The value of gold could be objectively evaluated and was set at two and a half times the value of silver.
The first royal mint was established in Lydia (modern-day Turkey) to create gold and silver coins with specific values. Gold became actual money, used in trade.
Gold fever quickly moved west to Greece and Rome. Rome began minting gold coins in 300 B.C. as other countries followed suit. While many things could be used to trade for goods, gold coins were reliable and easier to carry to the agora than a herd of cows or sheep.
Following the Norman conquest, the term “pound” was used to designate a pound of silver. The pound is still the British currency, although it now is available in paper form. Italy had its gold Florin, along with the Augustalis introduced by the Holy Roman Emperor Frederick II in the 13thcentury. The Venetians used the gold Ducat to pay for merchandise from the East, thus continuing to spread the use of gold coins to other countries.
Would the New World have been discovered as early as it was had the Conquistadores not been in search of gold for Spain? The New World teemed with gold, and Spain was determined to get as much as possible. So much gold entered Europe that there was a surplus of money and inflation.
As in the ancient world, the more gold a ruler had, the more powerful he could feel. In many countries, only royalty could own the prestigious gold.
In 17thcentury England, merchants kept their gold in royal mints. That didn’t stop Charles I from grabbing said gold illegally. Irate merchants then placed their gold with private goldsmiths. These goldsmiths lent out the gold left with them for a small fee, thus changing ownership of the stored gold. This pretty much is one of the functions of banks in modern times.
The American gold rush in 1848 established gold as the country’s currency standard. The first U.S. paper currency was printed in 1861, with a corresponding amount of gold to back up the currency’s value. One ounce of gold was worth $20.67. Paper money was even easier to carry around than gold coins, but the paper had actual value. Not surprisingly, this became America’s most successful economic period, creating millionaires out of paupers. Other countries, such as England, followed suit and backed their paper currency with gold. The gold standard was a guarantee of the actual value of paper money.
The Federal Reserve was created in 1913 to regulate the country’s monetary policy. Before the Federal Reserve could begin its function, the outbreak of WWI caused European countries to eliminate the gold standard in order to be able to print money more freely to pay for wartime expenses. The value of currency was no longer tied to gold. Money was printed at will and caused hyperinflation in many countries. Perhaps the best example was Germany, whose currency was left totally devoid of value, except perhaps as kindle.
The imperative to keep currency tied to gold became clear, and many countries returned to the gold standard to stabilize their economy. But the gold standard didn’t last. The lure of printing “free” money was too great. England officially abolished the gold standard in 1931. In 1933, President Roosevelt loosened the gold standard by allowing the frantic printing of fiat currency in an effort to recover from the Great Depression. The U.S. gold standard was officially abandoned in 1971.
Most global central banks still gold reserved, but no modern currency is officially linked to gold.
The lack of gold-backed currency means that its value will invariably fluctuate a great deal, while the value of gold remains fairly stable. You can check out today’s gold price any time.
Owning gold is the best hedge against economic downfalls. Gold has always and will always equal wealth. Like currency, gold needs to be stored in a safe facility. Check out offshore gold storage for information on how to create a safe storage account with easy access to your gold investment.
In a world filled with economic insecurities, gold is the one standard that has survived for thousands of years.