Throughout the history of mankind, empires have collapsed, many economic systems have failed and dozens of currencies have collapsed. However, gold has always been a safe haven to protect assets and wealth. At 11Onze we have a look at the history of the value of gold.

This history of wealth and gold begins around 3000 BC. The ancient Egyptians were the first to create jewellery from this precious metal. However, it was not until the 6th century BC that gold began to be used as a currency. This was the work of merchants, who were looking for a model that would allow them to standardise their transactions.

This model using gold became hegemonic in the known world, whether in Europe, Africa, Asia, or America. Gold became a true symbol of wealth and heritage. And, little by little, ways of refining this system were sought. The first time the value of a coin that is still in circulation was standardised to represent the government of a country was in Great Britain around 1066. Thus, the pound sterling was given its name.

And it was precisely on the pound sterling that the gold standard was first established. But it was not until many centuries later, according to historians. In 1717, the first gold standard was established by none other than Isaac Newton. It is the scientist who, in an essay on the monetary system, establishes a ratio of gold to silver that defines a relationship between gold coins and the silver penny that should be the standard unit of account in the Law of Queen Anne of Great Britain.

However, a true gold standard requires that there be a source of legal tender notes and coins, and that this source be supported by convertibility into gold. And this did not happen in England until David Hume developed the gold standard system in 1752. From then on, this gold standard spread to the rest of the world and became the characteristic monetary system of the 19th century.

Thus, the gold standard established that a country’s currency was fully convertible into grams of gold, i.e. it standardised the proportion of gold in each of the coins in circulation. In fact, central banks were obliged to exchange currency into gold if a citizen asked them to do so. And, in addition, there was free movement of capital, i.e. individuals could export and import capital in gold, often represented in paper money rather than cash.

Although the dollar was already a Spanish currency in circulation in the Americas, it was not until 20 years after its founding in 1792 that the United States also adopted the gold standard to mint the US dollar and, in doing so, gained prominence in the monetary world. However, after World War I and the crash of 1929 and the Great Depression, many countries decided to abandon the gold standard in order to devalue their currencies and recover an economy that was going from bad to worse.

The end of the gold standard

The 1944 Bretton Woods conference led the way: it was agreed that all currencies would be pegged to the dollar, with the condition that the dollar be kept at a fixed exchange rate with the price of gold. However, the model lasted a scant 30 years, until 1971, when President Richard Nixon ended the gold standard in order to reflate the American economy during the Vietnam War, just as other governments had done before him in the wake of the crash of 1929.

From that moment on, the dollar and the rest of the world’s currencies, including cryptocurrencies such as bitcoin, are what is known as fiat currencies, i.e. they depend entirely on the trust we place in them, as Jordi Sánchez, product manager at 11Onze, explained in La Plaça. Therefore, they are not backed by precious metals and this makes them more unstable.

In fact, the end of the gold standard is, for many experts, the beginning of the perversion of the entire monetary system, which prints banknotes when it suits it, and which means that, at present, the value of the dollar is oversized and causes turbulence in the economy that could trigger a global debt crisis. This is why gold is once again the safe haven that provides investors with protection.

Protecting yourself and avoiding gold bubbles

Gold has never ceased to be important in the global economy. For example, the balance sheets of European central banks such as the European Central Bank (ECB), the US Federal Reserve and the Bank of England, and international organisations such as the International Monetary Fund (IMF) must hold approximately one fifth of the world’s gold reserves. This prevents gold bubbles and controls the price of gold.

Moreover, in convulsive contexts such as the one we are living in, governments protect their country’s reserves by buying gold, as China and India are currently doing, as the former secretary general of Cecot, David Garrofé, explained in one of the latest episodes of the podcast ‘Ens Interessa’. Precisely so that ordinary citizens also have the opportunity to protect their assets from the rampant inflation, 11Onze has launched Preciosos 11Onze.

The material that blooms from the earth

It should be borne in mind that gold is a finite precious material, so it is difficult to lose its value, and is found in nature in its pure state, in elongated pieces or in small particles. At the end of 2006, it was estimated that 158,000 tonnes of gold had been mined throughout history, representing only a cube 20 metres on a side.

Gold as an element, apart from its unique metallic yellow colour, stands out from other metals as the most malleable and ductile known. Scientists value its density and high melting point. It also has a high electronic affinity, which makes it a good conductor of heat and electricity. It is also unaffected by air and most chemicals. In economics, gold is also reliable.

If you want to discover the best option to protect your savings, go to Preciosos 11Onze. We will help you to buy at the best price, the refuge value par excellence: physical gold.