The history of gold
The history of gold is a long one, people have used gold as a means of payment for thousands of years due to its rarity and durability. Historians believe that the desirability and value of gold arose through a combination of material density, resistance to corrosion and uniformity. It is also easy to divide into smaller units, unlike, for example, precious gems.
The first metal used as currency was actually physical silver, which began to be used as a means of payment more than 4,000 years ago, followed by physical gold 1,500 years later. Silver remained the most common form of precious metal for daily transactions until the 19th century, with gold remaining only the domain of traders and the wealthy.
Up until the 1970s, gold was the basis for the value of money through the “gold standard”. The gold standard was calculated as the value of the currency of an individual country, whereby the financial system of that country had agreed to purchase gold at a fixed price in exchange for the currency. The Bretton Woods Agreement, concluded after WWII, meant that a number of countries decided to tie their exchange rates to the US dollar. The US, for its part, decided upon a specific price of gold per ounce in dollars. This meant that the countries that tied their currency to the dollar had indirectly tied their currency to a specific gold price.
The history of gold continued with the end of the gold standard. This came about in part due to France’s decision in the 1960s and 1970s to decrease its dollar reserves and exchange them for gold with the US government. This decreased US economic influence abroad, and, in combination with the enormous costs that had been incurred for the Vietnam War, brought about a shift in the history of the gold rate. When President Nixon unlinked the dollar from a specific gold price in 1971 (known as the "Nixon Shock"), the end of the era of the gold standard had begun.
This was not, of course, a reflection on the appeal of gold, which remained unchanged, but a change in economic thinking. Even today, in the 21st century, many economists promote a return to an economic value system that resembles the former gold standard. The history of gold, already thousands of years old, looks set to continue for as long as mankind uses money in return for services or goods. For that reason buy gold would be a attractive investment.
