Is gold a medium of exchange?

Gold and silver, then, are the natural means of exchange. Every producer wants to convert their surplus into them, or promises to pay them on demand. Most advocates of commodity money choose gold as a medium of exchange because of its intrinsic properties. Gold has non-monetary uses, especially in jewelry, electronics and dentistry, so you should always maintain a minimum level of real demand.

Since ancient times, gold has been reliably used as a store of value and medium of exchange. Today, in an era in which the world is moving ever closer to the total elimination of currency and its replacement by plastic cards and even cyber money, the use of gold as money seems somehow completely out of place. . In an international gold standard system, gold, or a currency that is convertible into gold at a fixed price, is used as a means of international payments.

Under this system, exchange rates between countries are fixed; if exchange rates rise or fall below the fixed currency rate by more than the cost of sending gold from one country to another, there are large inflows or outflows of gold until exchange rates return to the official level. These “activation prices” are known as gold points. The medium of exchange facilitates the conversion of one form of commodity into other forms of products or services and vice versa. The trade cycle in any nation is moving forward due to the medium of exchange.

When gold becomes a medium of exchange, its demand will increase, as each person will need gold to buy goods and services. In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most used medium of exchange is the currency. Under most circumstances (including an economic crisis), gold owners would sell their gold for the currency in use at the time through a gold exchange service and then use that currency in the store or other market to buy what they needed.

A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. It can also refer to a monetary system of free competition in which gold or bank receipts for gold act as the main medium of exchange; or to an international trade standard, in which some or all countries set their exchange rate based on the relative parity values of gold between individual currencies. If gold becomes acceptable as a medium of exchange, demand for gold will be _____ and demand for bonds will be _____, everything else will remain constant. However, in 1971, the decline in gold reserves and the growing deficit in its balance of payments led the United States to suspend the free convertibility of dollars into gold at fixed exchange rates for use in international payments.

In 1958, a type of gold standard was re-established in which the main European countries provided for the free convertibility of their currencies into gold and dollars for international payments. The gold standard is a monetary system in which a country's currency or paper currency has a value directly linked to gold. gold standard, monetary system in which the standard monetary unit is a fixed quantity of gold or is held at the value of a fixed quantity of gold. Gold coins were not the perfect solution, since a common practice in the centuries to come was to cut these slightly irregular coins to accumulate enough gold that could be melted into ingots.

The advantages of the gold standard are that (it limits the power of governments or banks to cause price inflation through the excessive issuance of paper money), although there is evidence that, even before the First World War, monetary authorities did not contract the supply of money when the country had an outlet of gold and (creates certainty in international trade) by providing a fixed pattern of exchange rates. The gold standard is a fixed monetary regime under which government currency is fixed and can be freely converted into gold. For the next 50 years, a bimetallic gold-silver regime was used outside the United Kingdom, but in the 1870s Germany, France and the United States adopted a monometallic gold standard, followed by many other countries. .