Gold Standard

What is the 'Gold Standard'

A monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The gold standard was mainly used from 1875 to 1914 and also during the interwar years.

BREAKING DOWN 'Gold Standard'

The use of the gold standard would mark the first use of formalized exchange rates in history. However, the system was flawed because countries needed to hold large gold reserves in order to keep up with the volatile nature of supply and demand for currency. After World War II, a modified version of the gold standard monetary system, the Bretton Woods monetary system created as its successor. This successor system was initially successful, but because it also depended heavily on gold reserves, it was abandoned in 1971 when U.S President Nixon "closed the gold window."

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RELATED FAQS
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    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With ... Read Answer >>
  2. What was the Gold Reserve Act?

    The Gold Reserve Act of 1934 gave the government the power to peg the value of the dollar to gold and adjust it as it pleased. ... Read Answer >>
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    Learn how to track gold prices. Gold is a commodity traded as a physical asset and a futures contract. The one you track ... Read Answer >>
  4. Has gold been a good investment over the long term?

    Examine the performance of gold as an investment, dating back to 1933, when President Roosevelt required all gold bullion, ... Read Answer >>
  5. For investors, what are the alternatives to owning physical gold?

    Learn some of the primary alternate ways that someone can invest in the gold market besides simply purchasing physical gold ... Read Answer >>
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    Should I get a Gold IRA as another retirement account in addition to my traditional IRA and Roth IRA? Does the increased ... Read Answer >>
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