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Gold Standard
If you are interested in precious metals, you have undoubtedly seen the term gold standard come up with some regularity. But what does this term gold standard really mean? How did this gold standard work and how has it evolved over the years?What is the gold standard?
The gold standard is a monetary system. In this system, the currency in question is linked to a fixed amount of gold. That is, a country's central bank is willing to exchange its currency for gold at a fixed price. When several countries used this system, different currencies could be fixed.The gold standard was first introduced in the 18th century and was used until the 20th century.
The different currency systems
Different currency systems are used around the world. The best known or most common systems are:Gold Standard
The gold standard first came into use around the 18th century. This gold standard linked the respective country's currency or currency to a fixed amount of gold.
Fiat money
The currency system fiat money is the most common currency system. Some countries that use this system are the United States and Japan. In this system, money is not backed by a physical value such as gold, for example. The value of fiat money is determined by the market and the government.
Currency link
In a currency peg, multiple currencies are pegged together. This ensures that the exchange rate between these currencies is constant or within restriction.
Floating exchange rate
In the floating exchange rate system, the value of a currency is determined by supply and demand in the foreign exchange market.
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Abolition of the gold standard
The gold standard first came into use around the 18th century. Even in the 19th and 20th it was still used. Yet the gold standard is no longer in use. During World War I, most member countries left the gold standard.
After World War II, a new gold standard was created in 1944. This gold standard was also called the Bretton Woods system. The Bretton Woods system was used until 1971 until the United States abandoned it.
Since the last gold standard in 1971, there has been no gold standard in use.
Frequently asked questions about the gold standard
What is the future of the gold standard?
Currently, there is no longer a gold standard that has come into use. It also looks like a new standard will not make its re-entry any time soon.
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