Gold and Its History

Gold is the oldest international currency in the world. The fact that it does not corrode or tarnish, it is malleable, and can be easily shaped into coins, has made gold suitable for money. In 18th century BC the first coin containing gold was struck, and the first coin made exclusively form gold was struck to honor the order of King Croesus of Lydia (around 550BC).

The Mediterranean civilizations also started to mint coins and these coins often circulated outside these countries. Roman gold coins were used long after the fall of the Roman Empire and during the Middle Ages, in Europe, gold and silver coins were at the basis of the currency systems. Nevertheless, they were considered to be far too expensive and valuable to be used for the daily transactions.

The coins used were the specie money. The value of one coin resided in the value of the metal it was made from. This type of currency was little by little replaced with specie-backed money. The latter type of money has its origins in the banker's bills of exchange.

International gold standard had a short lifespan: from the 1870s to the 1914, when First World War started. The international gold standard helped the prosperity and the steady rise of economic systems. After the War there were attempts of returning to the gold standard but they were deemed to failure due to mismanaged strategies.

After the establishment of the Bretton Woods international monetary system most Western countries were helped to emerge into a period of prosperity. But slowly the decisions that were taken at Bretton Woods became out of date and in 1971 the United States abandoned the system.

Since the Bretton Woods system came to an end, gold has no longer been the backbone of the international monetary system. It has its set of monetary functions as it is considered the "ultimate form of payment" but its main function is as a reserve for the Central Banks.

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