History of Gold
Gold discovery and use by humans dates back more than 1,000 years ago. Gold’s colour, lustre, stability and rarity defined it as the ulitmate precious metal, and eventually became known as a reserve asset. Since gold has these special natural attributes, it had been given the money function.
（1）Gold was aristocratic monopoly period
Before the 19th century, because gold is extremely rare, gold is a symbol of imperial wealth and power; though the 6th century BC appeared the first gold coin in the world, but the people found it difficult to own gold.
Gold mines typically we owned and controlled by royals, and were operated by slaves and prisoners under extremely harsh conditions.
Gold has been a universal medium of exchange and a measurement standard of wealth for thousands of years.
In the long-term development of human society, gold was given a functional monetary value, which evloved to the gold standard monetary system. Gold became a monetary metal and was used as currency in the late 19th century to the 20th century by at least half of Europe and the capitalist countries that implemented a common monetary system.
First, the gold standard was born in the industrial revolution of the European countries, in 1717 the British first implemented the gold standard, to 1816 Britain enacted the “gold standard bill,” the official identified in the system administration, become the basis for the British monetary system, to the nineteenth century when Germany, Sweden, Norway, the Netherlands, the United States, France, Russia, Japan and other countries implemented the gold standard.
The main content of the gold standard system included:
1) Gold to specify the value of the currency issued by representatives of national currencies according to their weight in gold and contained a certain price relations;
2) Coins can be freely cast, anyone can be handed over to the National Mint in exchange for fiat currency;
3) Gold is unlimited legal tender currency, has the right to unrestricted means of payment;
4) States currency reserves of gold, international settlement also use gold, gold can be freely exported or imported, when the international trade deficit, may be paid in gold.
The gold standard has a free casting, freely convertible, freely input and output. With the formation of the gold standard, gold assumed the general equivalent commodity exchange.
A total of 59 countries around the world practiced the gold standard, some countries implement up to two hundred years, only a few years in some countries, but China has not been implemented.
Britain stopped the gold standard in 1919, restored in 1926 using; Under this system, the bill can only convert 400 ounces of gold bullion international sanction. Europe and other countries in the same period have strengthened trade controls, ban free sale and import and export of gold.
（3）Gold - an important role to play in the Bretton Woods system
May 1944, the United States was invited to participate in the preparation of the United Nations on behalf of 44 governments who met in Bretton Woods, United States. After a heated debate all parties signed the “Bretton Woods Agreement”, the establishment of a new international monetary system. Bretton Woods is actually an international gold exchange standard, also known as the dollar - gold standard. It makes the dollar at the center of the postwar international monetary system, since then, the dollar has become the major international reserve currency means of payment and liquidation countries. The Bretton Woods system is based on the dollar and gold-based gold exchange standard.
The core of the Bretton Woods international monetary system is:
● The dollar is the international currency settlement basis, and a major international reserve currency.
● Directly linked to the dollar and gold, other currencies are pegged to the dollar, the United States obligations of $ 35 per ounce official price of gold convertibility.
● A fixed exchange rate system. National currencies and the dollar, generally only in the parity of 1% of the amplitude fluctuations up and down, so the fixed price of gold in the financial system was intented to reduce excessive volatility. Central banks were obliged to intervene as necessary and to recover within a predetermined range.
The Bretton Woods monetary system, the role of gold in terms of functional currency in circulation or in the functional aspects of international reserves are limited, because almost all the gold in the world was controlled by the US government, and other countries almost no gold. No gold reserves, there is no issue banknotes reserves, this time to rely on US dollars. So the dollar as the world currency system in the lead, but we have to note that gold is stable the last barrier to the monetary system, so the price of gold convertibility and liquidity are still subject to very strict control of governments, countries basically prohibit residents free sale of gold, the gold market pricing mechanism is difficult to play an effective role. USD substitution past gold.
（6）The Bretton Woods system collapsed
1960s, the dollar can not be suppressed inflation, the European countries earlier postwar economy started to recover, national economic recovery because of growing wealth and have more and more dollars. Because of inflation triggered by the devaluation of the US, gold has become the best choice for asset preservation. By 1971, US gold reserves fell by more than 60%. The American government was forced to abandon the US dollar at a fixed official price of gold policy, various Western countries have currencies from the dollar, gold prices float freely enter the market in the period, the total collapse of the Bretton Woods international monetary system.
（7）The period of non-monetary gold
In 1976, after the “Jamaica Agreement” adopted by the International Monetary Fund and the two-year program to modify the agreement to determine the non-monetary gold. The main contents are:
Gold is no longer the standard value of currency parity;
Abolish official price of gold, IMF no longer intervene in the market, floating price;
Cancellations must be carried out with gold dealings with the fund settlement provisions;
The sale of IMF gold reserves 1/6 of the profits to help low-income countries to establish preferential loan funds;
SDRs instead of gold set up to pay for some of the members and between members and between the IMF.
Jamaica system in 1976 declared “non-monetary gold”, the functions of the world’s gold as currency in circulation decreased. However, gold’s financial attributes were not reduced, gold still is a special commodity, means and too of investment preservation, payment collection commodity function and financial functions in one.
As a special precious metals, gold is still favored and owned by countries an individuals as an international reserve asset.
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