The world officially came off the gold standard in 1971, when President Nixon took the dollar, which was and remains the world’s reserve currency, off its peg to the value of gold meaning it could ‘float’ in value compared to other currencies. Prior to this the value of the dollar was pinned as $35 per troy ounce of gold. The movement of the dollar off the gold standard meant widespread currency fluctuations as the dollar depreciated and the price of gold rose. Spending to pay for the Vietnam war and the accompanying inflation saw gold rise to $880/oz by January 1980 when the Soviets marched into Afghanistan.
Prior to what became known as ‘The Nixon Shock’, the UK came off the gold standard at the outbreak of the First World War.
Anything could be used to fix the value of currency and in the past other metals, such as silver, have been. Gold, however, has always been seen as the best. Universally it is seen as the best possible store of value.
Every country will have a national ‘central bank’ which will hold reserves to back their currency. Typically, this includes other currencies such as dollars, euros and yen but central banks, almost without exception, still hold large amounts of gold.
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