Written byTata Suharta Monday, 01 August 2011 00:00
Gold, the shiny yellow metal nugget, has been accompanying human culture for hundreds of years, even long before history was recorded. Gold’s natural beauty, its stead, restricted supply, and malleable state has led this metal becoming the epitome of precious metals. Many cultures, ideologies and religions use gold in their ceremonies and as symbolisms.
Gold carries out another function as a monetary standard. The gold standard is a monetary system where the standard economic unit of accounting is fixed to an amount of gold. Gold standards have been typical the basis for monetary policies all the way through human history, being broadly replaced by currency only in the late 20th century. In modern days, the British West Indies was one of the first regions to embrace a gold specie standard.
Following Queen Anne’s proclamation of 1704, the British West Indies gold standard was a factual gold standard based on the Spanish gold doubloon coin. Australia and New Zealand followed the British gold standard, while Newfoundland was the only British Empire territory to bring in its own gold coin as a standard. Royal Mint branches were set up in Sydney, New South Wales, Melbourne, Victoria, and Perth, Western Australia for the purpose of casting gold sovereigns from Australia’s rich gold deposits.
After World War II, a system similar to a Gold Standard and sometimes defined as a gold exchange standard was founded by the Bretton Woods Agreements. Under this system, many countries fixed their exchange rates relative to the U.S. dollar. The U.S. assured to fix the price of gold at roughly $35 per ounce. In effect, then, all currencies pinned to the dollar also had a fixed value in terms of gold.
Under the administration of the French President Charles de Gaulle up to 1970, France cut down its dollar reserves, trading them for gold from the U.S. government, in that way curbing U.S. economic influence abroad. This, along with the fiscal pressure of a federal setback for the Vietnam War and continuous balance of payments deficits, drove the U.S. President Richard Nixon to end the direct exchange rate of the dollar to gold on August 15th 1971, resulting in the system’s failure.
As of 2009, 165,000 tonnes of gold have been mined in human history. This is roughly equivalent to 5.3 billion troy ounces. The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.
Along with rising demand, price of gold continues to soar. As of August 11, gold hit a record of US$1814.45 per troy ounce. It is indeed a safe haven for investors amid concerns over a slowing global economy. Will it continue higher in the coming months? We will see.
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