How Gold Became the Gold Standard for Trade

06 April 2012

This is the VOA Special English Economics Report.

The best example of something is often called the "gold standard." It sets the standard against which other things are measured. In economics, the term describes how major trading nations once used gold to set currency values and exchange rates. Many nations continued to use the gold standard

until the last century.

In the United States, people could exchange paper money for gold from the eighteen seventies until nineteen thirty-three. Then-President Richard Nixon finally disconnected the dollar from the value of gold in nineteen seventy-one. From time to time, some politicians call for a return to the gold standard.

But in nineteen seventy eight, the International Monetary Fund ended an official gold price. The IMF also ended the required use of gold in transactions with its member countries.

Since that time, gold prices have grown. But the growth was uneven. Prices -- uncorrected for inflation – continue near record highs. Gold is trading above one thousand six hundred dollars an ounce. An ounce is about twenty-eight grams.

But people keep buying. Some people are "gold bugs." These are investors who say people should buy gold to protect against inflation.

People have valued gold for thousands of years. The soft, dense metal polishes to a bright yellow shine and resists most chemical reactions. It makes a good material for money, political power -- and, more recently, electrical power. If you own a device like a mobile phone or a computer, you might own a little gold in the wiring.