Your Gold IRA: What Is the Gold Standard?
In considering a gold IRA or precious metal investment, you have likely come across the term “gold standard” a number of times. If you are new to investment or finance, particularly in relation to buying gold or silver investments, you may not know exactly what the gold standard is, or even that it is no longer used. Home Stored Gold IRA, in using this blog as a tool for educating potential investors, can explain a brief history of the gold standard.
The Meaning of the Gold Standard
In simple terms, the gold standard is a monetary system where physical currency – such as paper money – is directly tied to the value of gold. When a country uses the gold standard to determine the value of its currency, it sets a fixed price for gold, and then buys or sells it based on that price.
Which Countries Use the Gold Standard
So, which countries currently use the gold standard? Actually, none of them do. Currently, the price of gold is determined by the demand for metal, and is used as an asset in central banks rather than a way to determine the value of their currency – which, without the gold standard, is defined as “fiat money”.
Which Country Was the Last to Use It?
If no countries currently use the gold standard, then which was the last? It is commonly accepted that Switzerland was the last country to abandon using the gold standard. The United Kingdom stopped using the gold standard in the early 1930s, while the US fully stopped four decades later in the early ‘70s (although this process began in the 1930s, too).
Why Was the Gold Standard Used?
Mankind has a long and storied history with gold, from ancient civilizations building golden idols to worship, to early economies using it to trade and establish wealth and status. Even today, gold carries many of the same associations of wealth and status, even without the gold standard in place.
The appearance, adaptability, and rarity of gold all contribute to our fascination with it and are major factors in the value we place on it – so it only made sense that we used this collective agreement on its value to value our currency.
Why Was It Abandoned?
If gold has so much historical value, why was the gold standard abandoned? There are a few reasons why countries switched to from the gold standard – primarily, the impact of the two World Wars. For the first part of the 1900s, economic stability was badly shaken by global conflict, and confidence in gold fell.
Combined with politics and public fear, fiat money was introduced by various countries as a more “flexible” form of currency, eventually leading us to today. Unfortunately, as many of us have seen, this flexibility can also mean unpredictability, which is where the benefits of a gold IRA come in.
The Gold Standard and Your Gold IRA
While the currency we use today may appear stable, it always carries a risk. At Home Stored Gold IRA, we understand how important the history of gold, and the value that history brings, offers a stability and a foundation that paper money simply can’t. Securing your future means knowing that you’ll have money in place when you need it, which can only be guaranteed with a gold IRA. If you are considering a gold IRA so that you have the security and peace of mind in volatile economic times, contact Home Stored Gold IRA today.