The History of Gold as Currency


For centuries civilisations have considered gold as a material of value. Globally, it is the most enduring form of currency. Its history is peppered with plays for economic and political dominance; however, the persistent story of gold is that it has played a pivotal role in forming the backbone of tender and currency for millennia.  

It is only as recently as the 1960s and 70s that gold stopped being the cornerstone of international currency trade, although it continues to be an asset of value. There is a contemporary trend back to gold as an investment, and there is a popular exploration in its return as a currency. 

First Gold Currency

Gold was first struck into coin by the order King Croesus of Lydia (now known as Turkey) around 550 BC.  Gold coins circulated as currency in many countries until they were replaced by paper money. When paper money was introduced, each note was redeemable for gold, on demand. Gold underpinned the values of each paper note. 

By the mid 17th century gold coinage was the cornerstone of trade for many countries, including the British Government. Tender similarly took the form of gold coinage and later paper notes redeemable for gold. 

The Gold Standard

By the late 19th century as travel and trade demand required an internationally agreed value of currency, the world’s major currencies fixed gold at a set price per ounce. This was called the Gold Standard and gold operated globally at a fixed rate. Regardless of the country, the value of gold was set. Any amount of paper notes could be traded for their value in gold. This meant transactions were no longer done in gold bullion or coins. 

During the efforts of World War I the Gold Standard was suspended while countries printed enough money to meet their military defence requirements. 

Countries began leaving the Gold Standard, under pressure from the social and economic impact of the war efforts and the Great Depression.

When the Great Depression hit in full force the price of gold rose as people flocked to trade their dollars for gold, fearing the economic collapse of the dollar. 

In 1934 the US Gold Reserve Act ordered Americans to turn in their gold for dollars and banned the private ownership of gold. 

Bretton Woods System

In 1944 after amassing the majority of the world’s gold courtesy of the Gold Reserve Act, the US proposed the Bretton Woods System.  An ounce of gold was equal to $US35. This system essentially required any other country to convert their currency into US dollars to value and purchase gold. 

Gold was no longer the standard, the US dollar was. This system is often viewed as a political and economic move from the US to centralise their dollar as the leader in economic dominance.

Defending the value of Gold

The world economy during this time grew steadily, however strains started to show in the 1960s. The steady economic recovery made the price of gold too low and many gold reserves were drained.  In 1961 the London Gold Pool formed as eight nations pooled their gold reserves to defend the value of gold against the Bretton Woods System.  This move introduced a two-tiered market – gold valued under the Bretton Woods System and gold valued at market rates under the London Gold Pool. 

In 1971 the Bretton Woods System collapsed, and gold traded freely again on the world markets. 

Return to Gold as Currency

Gold has historically been considered the safest investment during social and economic upheaval. In turbulent times, when other forms of currency and commodity are volatile, investors flock to gold to minimise the risks of unpredictable markets. 

During the rise of cashless tap and go transactions, it may seem that discussing a return to Gold as a tenable currency is flawed.  

It appears a primary hurdle to the return of gold as a currency, is the current lack of ease with which it can be used to instantly transact. 

Meld is bringing together the best of both worlds; the stability of gold and the digital requirements and instant trade times necessary to use gold efficiently to trade and transact.  

In the same way paper notes were equal to a value of gold, each Meld Digital Gold Certificate is backed by one metric gram of physical gold. Meld Digital Gold Certificates allow for gold to be traded and transferred digitally, cashlessly and instantly, anytime. Investors’ gold is kept in vaults around the country and their Digital Gold Certificates are instantly tradable for gold or dollars. 

The Meld software and service solution to the gold industry is once again allowing gold to return to its former place as the lynchpin of a safe, stable, transactable commodity and currency. 

Gold as Modern Currency 

Gold has been considered the most stable and reliable currency for millennia. It is the world’s most enduring form of investment. Recent history has seen great political and economic disruption, however gold endures as a go to investment in troubled times. 

Meld is allowing gold to be transacted in the same way a modern currency would, allowing the exploration of gold’s return as a viable and secure currency once again.

Disclaimer: This material is researched market commentary and not trade recommendations. We source our information from respected industry publications and announcements that we deem reliable. This is general information and may not relate to your unique circumstances. Market performance and futures are discussed as observations and predictions and are not indicative of future performance. This article is not investment advice, please seek independent financial advice from a financial professional. Meld is not a financial advisor.