Throughout the world gold was widely used as a standard for monetary exchange, but has been abandoned by world governments which have issued fiat currency in its stead. The amount of gold in the world is finite, but there is no limit to the quantity of paper currency which can be issued. At the beginning of World War I the warring nations moved to a fractional gold standard, inflating their currencies to finance the war effort. After World War II gold was replaced by a system of convertible currency following the Bretton Woods system. The last country to tie its currency to gold was Switzerland, which backed 40% of its value until the Swiss joined the International Monetary Fund in 1999.
Pure gold is too soft for day-to-day monetary use and was typically hardened by alloying with copper, silver or other base metals prior to the advent of paper money. The gold content of gold alloys is measured in carats (k), pure gold being designated as 24k. Many holders of gold in storage (as bullion coin or bullion) hold it as a hedge against inflation or other economic disruptions. (The ISO currency code of gold bullion is XAU).
Gold coins intended for circulation from 1526 into the 1930s were typically a standard 22k alloy called crown gold, for hardness. Modern collector/investment bullion coins (which do not require good mechanical wear properties) are typically 24k, although the American Gold Eagle, the British gold sovereign and the South African Krugerrand continue to be made at 22k, on historical tradition. The special issue Canadian Gold Maple Leaf coin contains the highest purity gold of any bullion coin, at 99.999% (.99999 fine). The popular issue Canadian Gold Maple Leaf coin has a purity of 99.99%. Several other 99.99% pure gold coins are currently available, including Australia’s Gold Kangaroos (first appearing in 1986 as the Australian Gold Nugget, with the kangaroo theme appearing in 1989), the several coins of the Australian Lunar Calendar series, and the Austrian Philharmonic. In 2006, the U.S. Mint began production of the American Buffalo gold bullion coin also at 99.99% purity.
Since 1968 the price of gold on the open market has ranged widely, from a high of $850/oz ($27,300/kg) on January 21, 1980, to a low of $252.90/oz ($8,131/kg) on June 21, 1999 (London Gold Fixing). The period from 1999 to 2001 marked the “Brown Bottom” after a 20 year bear market. Prices increased rapidly from 1991, but the 1980 high was not overtaken until January 3, 2008 when a new maximum of $865.35 per troy ounce was set (a.m. London Gold Fixing). A record price was set on March 17, 2008 at $1023.50/oz ($32,900/kg)(am. London Gold Fixing). The intraday record was set the day after at $1,033.90/oz.
The price of gold has touched US$1,108 an ounce on November 8, 2009 for a new record high, and closed above 1,100 on November 7th. One factor pushing the market up at this time was the Reserve Bank of India purchase of 220 tonnes of the metal from the International Monetary Fund for $6.7 billion, another sign of central banks moving away from the dollar as a reserve currency. With the November purchase, gold moved to about 6 percent of India’s $285.5 billion of foreign exchange reserves — up from the previous level of about 4 percent. The week was also marked by high-profile price debate including Jim Rogers, advancing a $2,000 per ounce forecast, and Nouriel Roubini, who termed the forecast “utter nonsense,” adding that there weren’t any inflationary or economic pressures that would drive the price that high. Gold would have to top $1,885 to set an inflation-adjusted record in 2009.
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