Gold Standard

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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."

RELATED TERMS
  1. Fiat Money

    Currency that a government has declared to be legal tender, but ...
  2. Bullion Coins

    Coins made from precious metals that are generally used for investment ...
  3. Totnes Pound

    An alternative currency of Totnes, in Devon, United Kingdom. ...
  4. Phoenix Dollars

    One-ounce silver disks introduced in October 2005 by an individual ...
  5. Silver Standard

    A monetary system in which a country's government allows its ...
  6. Mint Ratio

    1. The price of an ounce of gold divided by the price of an ounce ...
Related Articles
  1. Economics

    What Is Wrong With Gold?

    Despite its historic and symbolic appeal, this metal is simply a commodity. Here we explore its meaning as an investment.
  2. Investing

    A Holistic Approach To Trading Gold

    Combine technicals and fundamentals to tune out noise and confirm trends in this commodity.
  3. Budgeting

    The Gold Standard Revisited

    Think the value of gold is unshakable? Read this chronicle of its rise and fall.
  4. Forex Education

    Gold: The Other Currency

    Throughout history, gold has held its value against paper currencies. Learn how it can help offset market risks.
  5. Options & Futures

    Why Gold Matters

    Gold is a very useful investment during periods of instability and high inflation.
  6. Investing

    Using Technical Analysis In The Gold Markets

    The quest for this shiny commodity has made millionaires of paupers and, on the flip side, ruined many an investor.
  7. Investing

    What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed ...
  8. Options & Futures

    Trading The Gold-Silver Ratio

    This method may seem arcane, but many well-established strategies rely on it.
  9. Options & Futures

    Does It Still Pay To Invest In Gold?

    This asset's appeal dates back thousands of years. Find out whether it can live up to the hype.
  10. Forex

    Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has been the U.S. dollar. At one time, all currencies were backed by gold, ...

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center