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UncategorizedTypes of Gold Standards with Their Features

Types of Gold Standards with Their Features

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With the awareness of gold investment, the investors and the general public are becoming more and more interested in learning about the origins, history, gold standards, etc. of the precious metals to gain a better understanding of the market and make educated decisions about their investment.

Historically, gold standards have been of different forms Such as:

1. Gold Coin Standards

2. Gold Bullion Standards

3. Gold Exchange Standards

4. Gold Reserve Standard

5. Gold Parity Standards

Photo by Jingming Pan on Unsplash

1. Gold Coin Standards

Gold coin standard also goes by the name, gold currency standard, and gold species standard. It is the oldest gold standard form that is also known as the traditional gold standard or the orthodox gold standard. Before WW I, this standard was prevalent in Germany, France, the U.K., and the USA.

Under this standard, full standard full-bodies standard coins were circulated, and hence they are also regarded as the full gold standard.

Features of Gold Coin Standards:

  • The monetary unit of the standard is designed in terms of gold.
  • Token coins, paper money, and other forms of money are also in circulation. But they are convertible into gold.
  • Free and unlimited coinage and melting of gold coins.

2. Gold Bullion Standard

After WW I, on a gold bullion basis, the gold standard was revived in some countries of Europe. In 1925, Great Britain adopted it and it got modified into the version of the gold coin standard. After that, the currency was convertible into gold bullion and there was no gold coinage.

Features of Gold Bullion Standard

  • The standard currency unit is defined in terms of gold quantifying of given purity and the gold coins are not in circulation. Thus, gold remains a measure of value but not a medium of exchange.
  • People can not convert their gold into coins as coinage is not allowed.
  • The government guarantees full convertibility of currency in gold bullion and other forms of money are not fully supported by gold reserves.

3. Gold Exchange Standard

Under the Gold Exchange Standards, the gold currency was not in circulation and the gold reserves were also not held for external purposes. Gold was only converted into the currency of some foreign payments, and for domestic purposes, gold was not converted to meet internal needs.

Features of Gold Exchange Standard

  • Gold coins are not in circulation. The domestic currency only includes paper money and token coins.
  • Foreign exchange and foreign bills, as  well as gold, constitutes the country’s reserve base
  • No direct link between gold reserves and the volume of the domestic currency.

4. Gold Reserve Standard

In 1936, Gold Reserve Standard was developed as a new monetary system after the breakdown of the gold standard. It was formed to ensure stability in exchange rates. To stabilize the exchange rate and promote foreign trade while keeping the internal domestic currency value unaffected, Great Britain, France, and the USA entered into a Tripartite Monetary Agreement. It remained functional successfully for three years and ended after the outbreak of WW II.

Features of Gold Reserve Standard

  • Gold was neither used as a measure of value nor as a medium of exchange. The convertibility of gold was also not ensured.
  • Private individuals were not allowed to import and export gold. It is only traded for monetary purposes.
  • Without disturbing the internal economy of the country, exchange rate stability is achieved

5. Gold Parity Standard

The gold parity standard is deemed as the modern version of the gold standard that came into force in 1946 with the establishment of the IMF, or the International Monetary Fund. Under the system, to determine the exchange rate of gold,  every member country has to define the par value of its currency.

Features of Gold Parity Standards

  • To determine the exchange rates for foreign transactions, each country has to define the par value of its money in terms of gold
  • Under these standards, gold can not be a measure of value or a medium exchange. The domestic currency is inconvertible into foreign currency, gold coins, or gold bars
  • Under this standard, the monetary policy of one country has no direct or indirect link to that of another country.

The Bottom Line

Buying gold coins is a great way to diversify your investment portfolio, but it can be tricky to choose the right company. The Canadian Bullion. is a reputable, international dealer of precious metals. Their facilities are well-managed and have segregated storage, and their prices are very competitive. You don’t have to worry about storing your bullion in a dangerous location, since they insure and track your precious metal holdings.

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