While gold has fascinated mankind for 5,000 years, it hasn't always been the basis of the monetary system. A true international gold standard existed for less than 50 years, from 1871 to 1914.The gold standard is a monetary policy in which a currency is based on a quantity of gold. Basically, money is backed by the hard asset that is gold to preserve its value. The government that issues the currency links its value to the amount of gold it holds, hence the desire to have gold reserves.
Farmers traded fragments of gold and other metals in strange ways as a primitive method of payment; if you've ever visited a museum, you've probably seen these examples of these early means of exchange. It's even possible to borrow money from gold at low interest rates, freeing up liquidity and essentially giving you an option against the dollar. At the current market value (1,054 pounds sterling) and the Bank of England's most recent statement on reserve balances and promissory notes (259.5 billion pounds sterling), Britain's gold supply represents approximately 4.05% of the pounds in circulation. The gold standard is a fixed monetary regime under which government currency is fixed and can be freely converted into gold.
The media have often spoken of the opulence of being able to buy gold with a debit card, presenting it as the domain of wealthy sheiks who have nothing better to do than buy a few gold bars on a Tuesday afternoon. The United States used the gold standard, but eventually left it in the 1970s and is now a monetary system based on fiat money. Most advocates of commodity money choose gold as a medium of exchange because of its intrinsic properties. Under this system, exchange rates between countries are fixed; if exchange rates rise or fall below the fixed currency rate by an amount greater than the cost of sending gold from one country to another, there are large inflows or outflows of gold until rates return to the official level.
The gold standard is a fixed monetary system in which a government's currency is fixed to the value of gold. Similarly, the gold standard can provide fixed international rates between participating countries and can also reduce uncertainty in international trade. This action, known as “fixing the price of gold”, laid the basis for the re-establishment of an international gold standard after World War II; in this postwar system, most exchange rates were linked to those of the United States. Gold stimulated exploration in the 16th century and helped to standardize world trade when it flourished in the 19th century.
This concept began thousands of years ago in Asia Minor, when several precious metals, including gold and silver, were accepted as a method of payment. However, the United States set a new minimum price in dollars for gold that foreign central banks would use for purchases and sales. However, by 1928, the gold standard had practically been restored, although, due to the relative scarcity of gold, most countries adopted a gold exchange standard, in which they complemented central banks' gold reserves with currencies (U.