What is Gold Standard?
Investors Buz – Global Markets Roundup
Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Gold Standard”
The gold standard is a monetary system in which a country backs its currency with a reserve of gold, and allows currency holders to exchange their notes and coins for gold. For many years up to 1914, most of the world’s leading currencies had their exchange rate determined by the gold standard. The economic disruption resulting from the first world war led the combatants to abandon the link to gold.
The UK (with others) returned to the gold standard in 1925, before quitting it for good in 1931. The widespread use of the gold standard ended during 1930-33 as a result of global depression and large cuts in international lending. The United States left the gold standard in 1933 and partially returned to it in 1934. After the second world war, a limited form of gold standard continued but only directly applied to the dollar; other major currencies had their exchange rates fixed to the dollar under the Bretton woods arrangements. The dollar was finally cut loose from the gold standard in 1971.
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