The History of Gold

Gold is a very special piece of metal. Gold is the heart of all world resources and is worth billions. It’s often considered to be the first metal discovered occupying a central point in the history of mankind. It is defined as soft, precious with a mixture of yellow and olive brown colour. Gold is the 79th chemical element in the periodic table, one of the most recognizable among the group. Gold has a number of qualities that have made it exceptionally valuable throughout history. It is attractive in colour and brightness, ver durable and indestructible make gold the perfect choice as coinage. Usually found mined from underground in a comparatively pure form, these attributes make gold the perfect yet mysterious metal.

Gold dating back thousands of years

The history of gold dates back many centuries. It has played a vital role in the international monetary system. Gold was first struck in 550 BC on the order of King Croesus of Lydia, an area part of Turkey. Since ancient civilisation, from the Egyptians to the Inca, gold held a unique place of actual and symbolic value. Gold has over the centuries been used as money for exchange, a store of value and as valuable jewellery. Gold’s value is ultimately a social construction; valuable because we all agree it is. Gold’s illustrious and metallic qualities, its relative scarcity and the difficulty of extraction have only added to the perception of gold as a treasured commodity.

Gold is also matchless among metals in being central to many of the world’s religions and gold has long been associated with the divine sphere. Beyond circulating gold coinages, the historical role of gold evolved to being the cardinal anchor in entire monetary systems, a role which also supported the growth of free trade and economic development. Gold is the ultimate form of money having been used as money 97% of the time for over 2500 years.

The Gold Standard in the 19th and 20th Centuries

While gold had circulated as money for thousands of years, the 19th Century saw the advent of formal gold standard. Countries linked their currencies formally to gold, and gold coinage circulated freely as currency. This was led by Britain in 1816 who took the initiative to move to a full gold standard. Britain’s currency, the pound sterling, was defined in terms of gold. Gold coins circulated freely as domestic currency, and paper bill currency was convertible into gold. It was at this time, in 1817, that the modern gold Sovereign was introduced by Britain’s Royal Mint.

The era of the classical gold standard whereby countries linked their currencies to gold began later in the 19th Century. This spurred the growth of worldwide gold mining following the major gold discoveries in the US, Australia and South Africa. Germany introduced a gold standard in 1871. Belgium, France, and Switzerland did likewise in the 1870s, followed closely by Italy and Holland, and Japan in 1897. The US, who introduced a bimetallic standard of gold and silver in 1792, moved to a full gold standard in 1900.

After the 1st World War

During the 1st World War many countries suspended gold convertibility. The US kept its gold standard in place at an official gold price of $20.67 per troy ounce. Following the post-war Genoa Conference 1922, a new ‘gold exchange standard’ was launched. Countries linked their currencies to the British pound and US dollar. The dollar and pound were then able to be converted back into gold, Britain re-entering this new standard in 1925. This was short lived as Britain dropped out in 1933 along with many other participating countries. Domestically, the US came off the gold standard too, inflating its money supply and outlawing gold ownership for US citizens. In 1934, the US enacted legislation transferring all Federal Reserve held gold to the US Treasury. It raised the official gold price to $35 per ounce, further inflating the US money supply. The US money supply was only 40% backed by gold.

Gold as real money and final thoughts

Gold has always played a unique role in the history of the world. It was central to the economic growth of civilizations and every major religion. Gold is inextricably linked to the history of the world. Gold has also played a unique and ever-present role in the monetary history of the world.  Marcus Garvey once said “a people without the knowledge of their past history, origin and culture is like a tree without roots“. Likewise, people without knowledge of the history of gold is doomed to remain ignorant about the true nature of money.

Today’s western central bankers and monetary system architects know the truth. They just don’t share it in public very often, with the occasional exception. Indeed, Alan Greenspan said “in the absence of the gold standard, there is no way to protect savings from confiscation through inflation, there is no safe store of value”.With unprecedented challenges now facing the international monetary system, will those who understand history make a smart move and allow gold once again to regain its role at the centre of the global monetary sphere? Only future historians know the answer to this.

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