Gold

The United States adhered to the gold standard until 1971 (Munn, Garcia, & Woelfel 467). The gold standard merely indicates that all currency associated with a country is defined in terms of gold. While the United States was on the gold standard, its currency was freely convertible to gold at the price of $35 per ounce. In this way, currency could be converted to gold, or vice versa, at a fixed and standard rate.

From a trade point of view, the use of the gold standard helps nations control their balance of payments account. If there is a balance of payment deficit, gold leaves the country, which encourages exports and restricts imports. In time, this is supposed to reduce the flow of gold from the nation. If the nation develops a surplus of gold coming into the country, there is an inflati

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of gold up, as investors buy. Americans were prohibited from owning gold until the beginning of 1975, and are still subject to regulations regarding how gold can be held and maintained. According to the regulation, American citizens cannot be held to contracts which are payable only in gold or in an amount of currency measured by the value of gold. Some individuals continue to hold gold stocks, but most trading is done through the commodities market (certainly the large volume of gold trading is handled this way) without the traders actually taking delivery of the gold in question. With gold on the commodities market, its price has risen and fallen according to the political tide. The metal reached more than $400 per ounce in late September 1994, but fell back to $390.20, unable to maintain its $400 level for more than a few days. The reason for the price drop is attributed to speculators taking their profit from the price increase, and program trading (in which computer programs trigger sell orders) were put into effect for even small price declines (McGee). In addition to the price being driven down by apprehension over the inability of the market to support the price, there was also speculation that the Russian governme
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Approximate Word count = 2135
Approximate Pages = 9 (250 words per page)

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