Throughout the ages, gold has had quite a diverse history. At this point, no one has been able to pinpoint the precise place and time that man first encountered the yellow precious metal. But it’s safe to say that man fell in love with it at various places and times throughout early history.
The experts who study fossils have recognized that bits and pieces of gold were discovered in Spanish caves around 40,000 BC. These caves were used by Paleolithic man. But there is no precise date and historically we cannot come up with exactly when gold was first discovered.
In 3000 BC, it is widely known that the Egyptians used the shiny metal for adornment and jewelry. It was not used monetarily, as the ancient Egyptians’ medium of exchange was not gold but barley. The temple priests and pharaohs enjoyed using it for decorative purposes.
Gold first came into use monetarily around 700 BC. The citizens living in the Kingdom of Lydia – now known as Western Turkey – found use for gold as a medium of exchange.
But enough about early history. Let’s take a look at gold from a more recent perspective…
The History of Gold Circa 1792 and Beyond
This was an important time in the history of gold. This is when the United States Congress decided to adopt the bimetallic standard – the gold standard – as part of the nation’s currency.
At the time, gold was valued at $19.30 per Troy ounce. This value did not change for nearly 50 years, when the gold price finally rose to $20.67 per Troy ounce in the year 1834. Amazingly, this price level held for 100 more years in the United States.
At that point, Franklin Delano Roosevelt was the US president. This was the first instance where the US dollar was devalued. President Roosevelt raised the price of gold to a whopping $35 per ounce. That is a large jump in value as I’m sure you can see.
But there was a specific reason why FDR boosted gold value…
He was looking to increase the price of commodities – in particular the farm products – because of the Great Depression. Remember, many people were suffering from a lack of employment at this time. He felt that raising the price of gold and devaluing the US dollar would create more jobs for those suffering from the devastating effects of the Great Depression.
Then came the Bretton Woods agreement…
Bretton Woods Agreement
This agreement came about in 1944 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire.
The conference’s major outcomes included the following:
The formation of the International Monetary Fund.The formation of the International Bank for Reconstruction and Development.
The introduction of a proposed adjustable pegged foreign exchange rate system. In this system, the currencies were ultimately pegged to gold. This gave the International Monetary Fund full authority to intervene in the event of an imbalance of payments taking place.
Now we are going to jump ahead in time to the year 1971. This was the year that President Richard M. Nixon decided to take the United States off of the gold standard.
The Smithsonian Agreement
This agreement was hailed by President Nixon as the “greatest monetary agreement in the history of the world.” Many people believe that this agreement was more unsound than Bretton Woods and of the gold standard of the 1920s.
Why is that?
Ultimately, many countries in the world came to an agreement where they would maintain fixed exchange rates. But there was one major difference this time around…
Gold and world money would no longer back any of the currencies. Also, the European currencies were fixed at undervalued parities when you look at gold in relation to the US dollar.
The US only made one concession. They officially devalued the dollar rate to a measly $38 an ounce.
The History of Gold Circa 2001
At this point, gold was valued at roughly $270 an ounce. But this is precisely where the recent gold bull market began.
The value began to steadily rise, and in 2011 gold reached an all-time high of $1921 per ounce in September of that year. It has since pulled back in value, but it’s set to take off again.
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