The gold standard was a system under which nearly all countries fixed the value of their currencies in terms of a specified amount of gold, or linked their currency to that of a country which did so. At a country level, the gold standard has been credited for a long period of price stability which was supportive of economic growth. On an international level, the gold standard ushered in an era of remarkable capital flows, contributing to global trade, growth and significant global economic development. However, the strict adherence to the gold standard has also been associated with exacerbating the Great Depression, by contributing to extreme deflationary pressures in a time of significant economic decline, when expansionary monetary policies may have been more appropriate.

The gold exchange standard was also a period of relative stability and strong economic growth whereby countries tied their currencies to the US dollar, which was in turn tied to gold. Since the end of the gold exchange standard on August 15, 1971, the international monetary system has been progressing through no official international cooperative monetary system and gold has traded freely in the global markets. While gold no longer plays an official role in the international monetary system, it remains a cornerstone reserve asset accounting for 13% of total official reserves.

Furthermore, gold has been playing an increasing role among private investors, in part supported by the ease of ownership through ETFs. Private investment has also been supported by growing demand from emerging markets, in particular China and India. Gold’s lack of credit or counterparty risk, coupled with the deterioration of sovereign credit, has encouraged investors and global exchanges to increasingly use gold as a source of high quality collateral.