The history of the gold

Learn about the 6,000-year-old history of gold, interest of nations, powerful and astute individuals

Gold remains the most popular safe haven asset, especially in terms of investments. Gold listings have risen recently and the demand by Central Banks (including those in the Far East) and professional investors, especially westerners, has buoyed up the price.

The increase in the price of gold can be explained in terms of the diversification of risk and acquisition of safe haven assets in a period of economic and social instability due to the current international climate, particularly due to the outcome of the Brexit on 23 June and the American presidential elections.

Do we know the full history of gold and all its forms?

Gold was first mined by man about 6,000 years.
Where was it mined? In North Africa, Mesopotamia, the Indus Valley and the eastern part of the Mediterranean.
Gold grabbed the attention of nations, powerful men and individuals. There are those who have taken risks and those who have plotted around this metal.

It is aesthetically appealing with its shine, malleability and indestructibility (virtually speaking) which have made it an attractive and intriguing asset over the centuries. 

The first known gold objects, especially jewellery, appear to have belonged to the Egyptian culture (5000 B.C.). But the height of the production of gold objects, ornaments, even before coins, occurred in the Etruscan and Roman eras. Even now, gold is still a consumer item for use in industry and in jewellery. 

The use of gold as currency only occurred “recently” in 1816 in England, when the “Gold Standard” system was adopted, in which gold acted as a general equivalent and used as currency. Germany followed Britain’s example in 1872 and the United States of America in 1900.
Coinage, like the import and export of gold in any form, was free.
International trade enjoyed a balance due to the stable exchange rate between the currencies of the various countries. 

But with the outbreak of the first World War, this balance was upset and a period of severe instability began.
The “Gold Exchange Standard” was created: some coins were declared directly convertible into gold, while others were convertible in so-called valuable coins. 
But from the 1930s onwards, England abandoned the gold standard and shortly after, the United States also prohibited individuals from converting dollars in gold.

In 1944, by design of these two powers, representatives of 44 countries established the International Monetary Fund in Bretton Woods, near Carroll (New Hampshire). At this historic event, the price of the metal was fixed at 35 dollars per ounce and member states were called upon to pay a share of gold and national currency into the Fund, stating the equality between its own currency/gold and between its own currency/dollar convertibility suppressed by the Nixon administration in 1971. 

From 1948 onwards, following France, different countries begin to legalise gold trading. 
Then, in the Sixties, the breakdown between demand and offer starting with the dollar crisis compelled many individuals to purchase more gold. It is here that gold emerged as a safe haven asset in the face of the monetary instability.

March 1968: the free gold market was established. The price depended on demand and supply.
After a series of choices designed to devalue the dollar parity with gold advanced by the Nixon administration, European States claimed the right to sell gold on the free market. Thus, the “official price” was abolished and the International Monetary Fund returned a part of the gold reserves that had been deposited to the member states, while another was put towards supporting developing countries. The so-called “Dollar Standard”, the current system based on the dollar, therefore, was established.

Holding gold. For the central banks, this meant using gold as collateral against the issuance of coins and debts, as well as acting as a reserve in case of extreme need. For private individuals, on the other hand, it means having the goal of a medium to long-term investment to protect themselves from write-downs and economic, political and social uncertainties.
Its universal value gives security to the investor. 

The functions of gold: monetary, investment and consumption. Closely interlinked, the monetary function is such because gold is considered a medium of exchange, cost unit and measurement for deferred payments, as well as a store of value, a factor which also demonstrates the function as investment, along with the paper form and jewellery. Lastly, the function of gold consumption refers to the sphere of industry, to electronic and medical technology, as well as jewellery.