Gold: the metal, its monetary history and today's bullion forms
Gold has been used as jewelry, as a store of wealth and as money for thousands of years. Few other materials have played all three roles for so long. This page sets out the basics: what gold is as a metal, how it came to anchor monetary systems and then stopped doing so, and the forms in which people hold it as bullion today.
Gold as a metal
Gold is a chemical element with the symbol Au, from the Latin aurum, and atomic number 79. Its physical properties explain much of its history:
| Property | Value or behavior | Why it matters |
|---|---|---|
| Density | About 19.3 g/cm³ | A small bar is surprisingly heavy, and most substitutes are lighter |
| Melting point | About 1,064 °C | Can be melted and cast with fairly simple equipment |
| Corrosion | Does not rust or tarnish in air | Ancient gold objects still look like gold today |
| Malleability | Extremely high | Can be beaten into leaf thinner than paper or drawn into fine wire |
| Conductivity | Excellent electrical conductor | Used in electronics and connectors |
Its resistance to corrosion is the property that matters most for a store of value. A gold coin buried for centuries comes out of the ground essentially unchanged. Its high density, meanwhile, is one of the main tools for spotting fakes: very few affordable metals come close to gold’s weight for a given volume.
Pure gold is soft. That is why jewelry is usually alloyed with other metals, while investment bars are kept as close to pure as possible. Purity is expressed in karats for jewelry (24 karat being pure gold) and in fineness, such as 999.9, for bullion. Our page on gold bullion ingots explains the fineness grades.
From coinage to the gold standard
Gold was valued long before it was used as money, but its role as currency took a decisive step with coinage. Once a ruler or state stamped a piece of metal to guarantee its weight and purity, gold could circulate without being weighed and tested at each exchange. Gold coins circulated alongside silver ones for most of recorded history, and many monetary systems used both metals.
In the nineteenth century, a growing number of countries moved to a gold standard: their currencies were defined as a fixed weight of gold, and paper money could, in principle, be exchanged for gold at that rate. Britain was at the center of this system, and the pound sterling’s link to gold underpinned much of world trade before the First World War.
The system was strained by war and its aftermath. The United Kingdom suspended gold convertibility during the First World War, returned to a form of the gold standard afterwards, and then left it in 1931 in the middle of the Great Depression. Other countries followed in the years after. In the United States, private holdings of monetary gold were restricted in 1933, and the official price of gold was raised to $35 an ounce in 1934.
Bretton Woods and the end of convertibility
In 1944, the Allied nations met at Bretton Woods, in New Hampshire, to design the postwar monetary order. The system they agreed on placed the US dollar at the center. Other currencies were pegged to the dollar, and the dollar was convertible into gold for foreign governments and central banks at $35 per troy ounce.
The arrangement held for about a quarter of a century, but the pressure on it grew. As dollars accumulated abroad, the United States held less gold relative to the claims that could be presented against it. In August 1971, the US government suspended the convertibility of the dollar into gold. Within a few years, the major currencies were floating against each other and gold no longer had an official fixed price.
Since then, no major currency has been backed by gold. The metal has nonetheless kept a place in the financial system. Many central banks still hold large gold reserves, and gold trades freely in markets around the world, with its price set by supply and demand rather than by decree.
Holding gold bullion today
“Bullion” means gold valued for its metal content, as opposed to jewelry or collectible items. Private investors mainly hold it in three physical forms:
- Bars. From one gram to a kilo and beyond, produced by refiners and mints. Larger bars carry the lowest premium per gram. See gold bars for the main families.
- Coins. Bullion coins issued by national mints, carrying a face value and a stated gold content. They are easy to recognize and divide a holding into convenient units, at a somewhat higher premium than bars.
- Rounds. Coin-shaped pieces made by private mints without legal-tender status. They are bought for their metal content, like small bars.
Beyond physical metal, there are indirect ways to gain exposure to gold, such as funds and mining shares. These behave differently and carry their own risks. Our guide to the ways of investing in gold and silver compares them.
Where to go next
Gold’s appeal as bullion rests on the properties described above: it does not decay, it is dense and hard to counterfeit convincingly, and it is recognized almost everywhere. Choosing a form, a size and a dealer is where most practical decisions lie. Our guides to buying gold bars and to gold vs silver are good next steps. This page is general education, not financial advice.
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