Previously, we discussed the usage of gold in jewelry. One of the other major uses of gold throughout history, and into the present day, is its usage as a method of monetary exchange — in other words, as money. Gold transactions date back over six millennia, and continue strong into this day. Its high value and limited supply make it a useful medium for exchanges. In addition, gold’s durability, combined with its portability, have also made it an attractive option.
Paper money, until the past half century, was long backed by precious metals. Each bit of paper currency in circulation was carefully appraised based on the metal it represented. The strongest currencies were the ones backed by gold. Under this system, known as the “gold standard,” any person could exchange their paper money for its equal value in gold. Due to inflation, and the limited amount of gold, this system became untenable. It’s no longer used by any nation, despite calls from many to return to it.
The gold used for actual exchange, or even as backing of currency, was typically held in bars. These bars are also known as “gold bullion.” Even with the dropping of the gold standard, bullion is still kept by many governments as a safe investment due to its continuing high value. Individuals and corporations also use gold as an investment. The bullion (and coins) allow for easy transportation, and a minimal amount of manufacturing.
The first usage of gold coins is recorded as occurring in about 560 BC. King Croesus of Lydia — in what is a region of modern day Turkey — had coins of his likeness minted. This began a tradition of gold coinage that continued well into the 1900s — before paper currency became more common. The coins that were created typically represented either a unit of currency, or were a standard weight. Later, coins were also alloyed to other metals so that lower units of currency could be created.
Gold today plays a huge role in the world economy, despite the gold standard’s abandonment. Investors prize gold because it’s one of the few, very rare “safe investments” in the entire stock market.
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