Gold

Value

See Also: gold as an investment.

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Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 carats being pure gold and lower ratings proportionally less. The purity of a gold bar can also be expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as 0.995.

Related Topics:
Troy weight - Gram - Carat - Millesimal fineness

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The price of gold is determined on the open market, but a procedure known as the Gold Fixing in London, originating in 1919, provides a twice-daily benchmark figure to the industry.

Related Topics:
Gold Fixing - London

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Historically gold was used to back currency in an economic system known as the gold standard in which one unit of currency was equivalent to a certain weight of gold. As part of this system, governments and central banks attempted to control the price of gold by setting values at which they would exchange it for currency. For a long period the United States government set the price of gold at $20.67 per troy ounce ($664.56/kg) but in 1934 the price of gold was set at $35.00 per troy ounce ($1125.27/kg). By 1961 it was becoming hard to maintain this price, and a pool of US and European banks began to act together to defend the price against market forces.

Related Topics:
Gold standard - Weight - Central bank - Troy ounce - 1934

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On March 17 1968, economic circumstances caused the collapse of the gold pool, and a two-tiered pricing scheme was established whereby gold was still used to settle international accounts at the old $35.00 per troy ounce ($1.13/g) but the price of gold on the private market was allowed to fluctuate; this two-tiered pricing system was abandoned in 1975 when the price of gold was left to find its free-market level. Central banks still hold historical gold reserves as a reserve asset although the level has generally been declining. The largest gold depository in the world is that of the U.S. Federal Reserve Bank, held at Fort Knox.

Related Topics:
March 17 - 1968 - Gold reserves - Reserve - U.S. Federal Reserve Bank - Fort Knox

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Since 1968 the price of gold on the open market has ranged widely, with a record high of $850/oz ($27,300/kg) on 21 January 1980, to a low of $252.90/oz ($8,131/kg) on 21 June 1999 (London Fixing). Prices have risen to the $468/oz mark in 2005, due to a depreciation of the US dollar and inflation due to rising energy costs. The price of gold has remained relatively constant in currencies not tied to the US dollar; for example, it has not varied by more than 10% from €330/oz (€10,600/kg) or A$560/oz (A$18,000/kg) during this time.

Related Topics:
21 January - 1980 - 21 June - 1999 - € - A$

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Because of its use as a reserve store of value, the possession of gold is sometimes restricted or banned. Within the United States, the private possession of gold except as jewelry and coin collecting was banned between 1933 and 1975. President Franklin D. Roosevelt confiscated gold by Executive Order 6102, and President Richard Nixon closed the gold window by which foreign countries could exchange American dollars for gold at a fixed rate.

Related Topics:
Franklin D. Roosevelt - Richard Nixon

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In the first few years of the 21st century, reports started to circulate that Malaysia was planning a return to the gold standard -- to issue and use gold dinars as currency in international trade. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest. http://www.islamidag.dk/ulamaongold.html Nonetheless, gold dinar currency has not yet emerged. http://english.aljazeera.net/NR/exeres/E7515CEE-880E-492F-B225-A94E21D90D2B.htm http://www.mineweb.net/columns/american_notes/336075.htm

Related Topics:
21st century - Malaysia - Gold standard - Dinar - United States dollar - Islamic law

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As a tangible investment gold is sometimes held as part of a portfolio because over the long term gold has an extensive history of maintaining its value. It has in the last century gained ground in relation to fiat currencies owing to inflation. Gold becomes particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. People who enjoy investing in gold are known as goldbugs.

Related Topics:
Tangible investment - Inflation - Hyperinflation - Fiat money - Goldbug

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Futures contracts based on gold currently trade on various exchanges around the world. In the US this occurs primarily on COMEX (Commodity Exchange) which is a subsidiary of the New York Mercantile Exchange. Speculation about the future price of gold and other commodities is carried on at COMEX. Recently, gold-based ETFs like GLD have emerged as a more convenient investment vehicle.

Related Topics:
Futures contract - COMEX - New York Mercantile Exchange - ETFs

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