Gold is one of the most dynamic elements of the modern economy and some might find it funny that the oldest form of valued physical commodities is still thriving today. The first gold coins were produced in 700 BC and since then this precious metal has been used as a favored currency. The fact that gold was scarce and highly valued made it the perfect means of exchange, regardless of what the exchanged items were. The history of gold turning into money spans over a period of 2600 years and the turning point in goldís history is the year 1971.
How Did Gold Become Paper?
Throughout history coins began to be created out of gold and other metals, thus making the values of the actual coinage fluctuate in time. The process of turning physical gold into money began when goldsmiths, who used to store gold for other society members for a fee, started to issue receipts for their storage. The idea of paper receipts quickly spread as it was more convenient than carrying the actual metal with them, so people began to get accustomed to the idea of paper money. Goldsmiths gradually turned into bankers and the currency evolutionary process continued developing.
Why Did The Gold Window Close?
The 15th of August 1971 is the day when the ìGold windowî was closed by the American president Richard Nixon. From that moment on paper money could no longer be converted to gold, a fact that took the precious metal out of currency exchanges.
In order to understand why the situation with gold in the economy reached this point, you need to travel back in time to the moment when bankers saw the opportunity of replacing gold with paper money. Since they had the power of issuing receipts for gold, bankers thought of producing more receipts than the amount of gold they held. But this practice also became popular and banks soon started lending these receipts to governments.
New Acts And Regulations Concerning The Use Of Gold
England was the country where bankers created the first central bank. The main purpose of such a bank was to lend money to monarchs, but it also served as protection for those bankers who issued more money than they could redeem in gold. However, it became obvious that this practice had a negative impact on the countryís economy. This lead to the apparition of the ìPeelís Bank Actî, which stated that banks were restricted to issue new banknotes only if they were 100% backed by gold or up to £14 million in government debt. This has kept the importance of gold as a decisive factor in the global economy right through to present times.
What Do You Know About Modern Gold?
An interesting evolution of gold prices began in 1934, when gold was priced at $20 an ounce. In the period until 1971, the gold price remained around $35 an ounce. However, with the changes that occurred in the global economy, gold prices reached $300 an ounce in 2000 and they have increased to around $1200 an ounce in 2015. There are many factors that influence the price of gold but modern gold prices appear to continue to rise.
Can Gold be Controlled?
Do you ever think about gold when you are going to work or while shopping? Even though our modern society perceives gold more as a fashion item, nations still rely on the power of the precious metal in order to keep their economies balanced. We might not see gold in stores, while paying our taxes, or while taking credits from a bank, but it is an element profoundly involved in all these actions. It is fair to say that, throughout human history, we were often the ones being controlled by this precious metal, and not vice versa, as most people believe.