HISTORY OF GOLD
Gold was discovered in its most basic and natural state – in streams and in the ground of the ancient world – and gold is one of the first precious metals known to mankind. As a natural response to its beauty and rarity, gold became a symbol of royalty and glamour in nearly every culture that was able to obtain it. Its brilliance and resistance to tarnish made the precious metal an ideal jewelry-making commodity, and eventually a viable currency.
However, there is little consensus in the archaeological and scientific communities on identifying when and where humans first came in contact with and began to use gold.
It wasn’t until 2600 B.C. that the ancient Mesopotamians would forge some of the first gold jewelry, paving the way for a variety of aesthetic and decorative uses – both as adornment for humans and structures alike. In 1223 B.C. the iconic Tutankhamen’s tomb was constructed primarily of gold, and legend has it that in 950 B.C. Solomon’s famed temple was built using gold as a prevalent construction material.
In fact, gold was largely responsible for creating the concept of money itself, giving rise to some of the first gold coins in 700 B.C. Standardized gold and silver coins would eventually become currency and replace barter arrangements, making trading during the classic periods much easier.
By 564 B.C. King Croesus of Lydia would improve the refining techniques of gold and establish the first international gold currency.
CONQUESTS FOR GOLD
EGYPTIAN CONQUESTS FOR GOLD
While pieces of natural gold have been discovered in Spanish caves that date as far back as 40,000 B.C., it wasn’t until 3600 B.C. that gold was smelted down by Egyptian goldsmiths.
The Egyptians were part of some of the earliest gold conquests, using prisoners of war, slaves and criminals to work the primitive gold mines of their time. This all took place during a time when gold had no official monetary value or significance but was sought after simply because of its high desirability as a commodity.
GREEK CONQUESTS FOR GOLD
By 550 B.C. Greeks had begun mining for gold throughout the Mediterranean and Middle Eastern regions, causing gold to draw speculation from Plato and Aristotle regarding its origins.
Because of being frequently located in water, gold was often thought to be a dense combination of water and sunlight, based on limited scientific and geological understanding of the both substances.
With such widespread mining, both by the Greek government and private citizens, it’s not uncommon to find remains of those mines today.
ROMAN CONQUESTS FOR GOLD
The Romans would significantly expand on the technology and mining capabilities of the Greeks; certainly due in part to the vastness and resources of the Roman Empire.
They built water-based mining operations, and were responsible for several of the first stream-based gold miningconstructs, including:
The Romans also mined underground using mostly slave and prisoner labor. Their method was further enhanced by developing a roasting technique that became a more efficient method of separating gold ores from other rock, making their gold more pure and valuable.
These advancements allowed them to improve on and exploit old mining sites that they would inherit as a result of the wide landmass under their jurisdiction.
TIMELINE OF GOLD LEADING UP TO MODERN TIMES
1300: First Hallmarking Practice Established: At Goldsmith’s Hall in London, the first hallmarking systems for determining and verifying the quality of precious metals was established.
1422: Venice’s Record Year: Venice would mint what was a record of 1.2 million gold ducats; coins which were easily minted and carried a high value.
1717: United Kingdom Establishes the Gold Standard: The British government links a value of 77 shillings to gold at mint price
MODERN DAY HISTORY
U.S. CONGRESS ADOPTS BIMETALLIC STANDARD
Gold’s history in the United States began in 1792 when the U.S. Congress established a bimetallic (gold and silver) standard for the nation’s newly minted currency. At the time gold was valued at $19.30 per ounce.
THE CALIFORNIA GOLD RUSH
In January 1848, John Marshall discovered traces of gold while building a lumber mill near Sacramento for a pioneer named John Sutter. Despite Sutter’s initial desire to keep the matter private and concealed, rumors spread and were confirmed by San Francisco publicist Samuel Brannan.
As word spread, Americans and immigrants alike abandoned their pursuits in favor of the Gold Country of California, eventually earning them the nickname, “Forty-Niners.”
The ensuing California gold rush would bring a total of 300,000 people to the state. Those who didn’t come by sea primarily traveled from the eastern portions of the United States by way of the California and Gila River Trails.
The hardships for those traveling were substantial, and while a few people made a fortune from their findings, many were hardly able to break even and pay for their trip.
This was partly due to how quickly the work necessary to obtain gold got progressively more strenuous.
The progression of difficulty went something like this:
Picking up off the ground.
Found in streams and riverbeds using the panning technique.
More sophisticated and in-depth mining techniques.
Technologically advanced systems requiring financing.
The longstanding effects of the Gold Rush made it a significant event in America’s young history, having grown the population of San Francisco from 200 in 1846, to 36,000 by 1852. During that time, roads, schools, churches and businesses were built, along with other towns, eventually leading to the establishment of California as a state in 1850.
The newly established agricultural and economical relevance of California would connect it with the eastern states via cross-country railroads that were completed by 1869.
THE SMITHSONIAN AGREEMENT
In 1933 President Roosevelt would suspend the convertibility of gold into dollars when it was still worth only $20.67 per ounce. By Presidential proclamation the conversion was reestablished, though at a higher rate of $35 per ounce.
THE GROUP OF TEN
It wasn’t until December of 1971 that the next landmark event in the American history of gold would take place.
During that month, members of 10 countries and the central banks of England and the United States, called the Group of Ten, would meet at the Smithsonian Museum and sign the Smithsonian agreement that effectively adjusted the fixed exchange rates that had been previously established at the Bretton Woods conference in 1944.
During that conference over 700 delegates from 44 allied nations in Bretton Woods New Hampshire established an international fixed exchange rate system based. Under this system, currencies were pegged to the U.S. dollar, convertible to gold at $35 per ounce.
This was done primarily as a response to the overvaluing or “deflation” of the dollar in the 1960s, brought on by debt from the Vietnam War, the Great Society programs and monetary inflation on the part of the Federal Reserve, all of which were draining the U.S. gold reserves.
The gold reserves kept in the London Gold Pool were an eventual casualty of these fiscal policies.
Almost immediately his administration began negotiating with industrialized countries to determine a new exchange rate.
While meeting at the Smithsonian Institute in Washington D.C. in December of 1971, a group of ten countries referred to simply as the Group of Ten, signed the Smithsonian Agreement. At that point the U.S. promised to peg the dollar at $38 per ounce of gold, along with 2.25% trading bands.
Additionally the signing countries agreed to appreciate their currencies against the dollar.
Though President Nixon touted the Smithsonian Agreement as a reorganization and improvement of international monetary affairs, the continued lack of discipline on the part of the Federal Reserve and the United States government caused pressure on the established rate and an eventual 10 percent devaluation of the dollar.
Within a matter of decades, every country involved in the Smithsonian Agreement decided to let their currencies float, effectively breaking the agreement.
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