GOLD: USD/oz1,216.25 | EUR/gr36.42SILVER: USD/oz17.23 | EUR/gr0.5176

gold in the past

Man began to extract gold around 6000 years ago, in regions where the first civilizations arose, or rather for Northern Africa in Mesopotamia, in the Indus valley and in the western Mediterranean.

It has been calculated that around 150,000 tonnes have been produced (a cube with a side of 17-18 metres and each year around 2,400 tonnes are extracted. Around this the interests of the nations and of individuals have clashed: enormous feats and risks have been undertaken in order to own it.
Its physical properties, shininess, easy processing, virtual indestructability, have conferred on gold a special role in the history of mankind; through the centuries gold has been valued for its beauty and rarity. The oldest gold objects are Egyptian ones dating back to around 5.000 BC. From the most ancient times gold was used to produce ornaments and jewellery. The civilizations that mastered the art of producing gold objects were the Etruscans and the Romans. While the metal has always had a monetary role, for thousands of years considered the most important and secure payment means, gold began to be used as legal tender in England, where the “Gold Standard” system was adopted in 1816. Subsequently other countries (Germany in 1872, USA in 1900) followed their example. With this system the national coins could be converted into gold.

Minting was free and gold, whether in the form of coins or raw gold could be freely imported and exported. The exchange rate between coins of different countries was stable as it could only vary within a fixed parity; this ensured not only stability but also a balance in international exchanges.              
The beginning of the first World War marked the end of the gold system and was followed by a period of great stability. Great Britain in 1925 and France in 1927 substantially returned to the pre-war system: the central banks put gold reserves side by side with convertible currencies (dollars, Sterling, French Francs, etc.), giving birth to the “Gold Exchange Standard”. Some coins were declared to be directly convertible into gold, others (such as the Italian Lira) not directly into gold but into “precious” coins which could be converted. In 1931 England suspended this convertibility and in 1934 USA established that individuals could not change dollars into gold. In 1944, by an initiative of the United States and England representatives of 44 countries met at Bretton Wood, creating the International Monetary Fund (I.M.F.). On this historical occasion the price of the metal was fixed at 35 $ per ounce, the price at which the USA committed to buying it from anyone and selling it only to Central Banks. Each participating country was obliged to pay the I.M.F. a quota of gold and national currency declaring the parity between its currency and gold and, indirectly, with the dollar.      
In 1948 France was the first country to legalize gold trading, followed in 1951 by Switzerland, a country without any import or export barriers. In 1954 the London market opened again and in the Sixties the balance between supply and demand broke down, caused by the serious dollar crisis, which led many operators to make significant purchases of gold. It was at that moment, for the first time, that gold assumed the role of safe haven in the face of currency instability. 17/03/1968 can be considered the official date of the birth of the free market for gold whose price was determined by supply and demand. On 15th August 1971 the Nixon government suspended the theoretical convertibility of dollars with gold, causing the downfall of one of the pillars of the “Bretton Woods system”. Subsequently Nixon’s government twice devalued the parity of the dollar against gold. With a dollar that was no longer convertible into gold, in 1973 the European governments asked the USA for the “institutional” market of gold to be abolished (parity of the $ against gold) demanding the possibility to sell gold on the free market. In 1976 the Countries that were part of the IMF officially decided to abolish the “official price” and therefore the metal’s double market. With this agreement the I.M.F. returned a part of the gold reserves to the countries that had deposited it and sold a part to help developing countries. In this way gold lost its role as a basis for the international monetary system, introducing the current system based on the dollar (Dollar Standard).
The liberalization of the gold market took the price in 1975, the year when the sales of the USA Treasury began, to 200 $ per ounce. In March 1979, with the birth of the European monetary system, it was established that the country members would pay 20% of their reserves in gold and 20% of their reserves in dollars in exchange for ECU; this currency therefore, had gold as its basis and allowed the central banks to be able to use their gold reserves. 
Although recently the monetary role of gold has been progressively changed, losing its historic central position, it has maintained an important role, as it is considered the perfect haven, used in times of need by individuals and as support for their own currency by Central Banks. 


Gold primarily has three roles: monetary, investment and consumer usage.

Thanks to its characteristics of transportability, incorruptibility, divisibility, immediate recognizability and fungibility, gold has been preferred over other metals for being transformed into coins. The first use of gold coins has been attributed to the Chinese, while in the West it goes back to the VII° century BC to the era of king Croeus of Lydia (now western Turkey). The role as a simple reserve is performed when gold is used as a financial activity, which maintains its value in time. For central banks gold reserves act as a guarantee following the issuing of coins and debts, as well as reserve in the case of extreme necessity. “Individuals on the other hand keep gold for mid/long term investment purposes with the aim of protecting themselves from devaluations and economic-political uncertainties.” (Landi). Furthermore gold offers the investor safety and solidity, its value is universal and easily realizable at any time. Speculative transactions on non-physical gold (financial or paper gold and derivative products) take place when someone tries to make a profit from price variations of the metal. In any case gold producers and those who process it make use of derivatives also to hedge risks. The third role of gold is that of a consumer good for industrial usage, in jewellery or in electronic or medical technology. Jewellery acts as an investment (according to the countries and historic time period) and as a consumer good that most of all offers those that own it the pleasure of wearing it and the “status symbol”. Usage in electronics is due to its characteristic of being a good conductor of electricity. Thanks to its resistance and non-toxic nature it is used in the medical field especially in prosthetics and orthodontics.


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