Gold standard

Gold standard (/ɡoʊld ˈstændərd/) is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency.

Etymology

The term "gold standard" originated from the practice of using gold as a standard of measure, a benchmark, or a point of reference in the monetary system. The term was first used in this context in the late 19th century.

Related Terms

Fiat money: Fiat money is a type of currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material from which the money is made.
Bimetallism: Bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals.
Monetary policy: Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.
Bretton Woods system: The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western Europe, Australia, and Japan after the 1944 Bretton Woods Agreement.