A Brief History of Gold
Gold was probably the first metal known to the early hominids that, on finding it as nuggets and spangles in the soils and stream sands, were undoubtedly attracted by its intrinsic beauty, great malleability, and virtual indestructibility. As tribal development progressed through the Paleolithic, Mesolithic, and Neolithic ages, and as people congregated into civilized centers, the metal appears to have taken on a sacred quality because of its enduring character (immortality), being worn initially probably as amulets and later fashioned into religious objects (idols).
Early references to the first discovery of gold are essentially legendary or mythical. Thus, Cadmus, the Phoenician, is said by some early writers to have discovered gold; others say that Thoas, a Taurian king, first found the precious metal in the Pangaeus Mountains in Thrace. The Chronicum Alexandrinum (A.D. 628) ascribes its discovery to Mercury (Roman god of merchandise and merchants), the son of Jupiter, or to Pisus, king of Italy, who, quitting his own country went into Egypt. Similar legends and myths concerning the initial discovery of gold are extant in the ancient literature of the Hindus (the Vedas) as well as in that of the ancient Chinese and other peoples. In fact, the discovery of the element we call gold is lost in antiquity.
The gold standard is a monetary system in which a region’s common media of exchange are paper notes which receive substantial premia because they are normally freely convertible into fixed quantities of gold. Under a gold standard, money issuers normally stand willing to redeem their notes, upon demand, for pre-set, intertemporally constant, fixed amounts of gold. The gold standard is not currently used by any government, having been replaced completely by fiat currency, and private currencies backed by gold are rare.
Gold standards should not be confused with their historical predecessor, “gold-coin standards,” wherein taxes are payable in either gold coins or overvalued, government-minted, less expensive, coins.
The main purpose of either government money system has historically been to provide seigniorage, or money-creation profit, to governmental leaders in order to provide them with general purchasing power during emergencies, especially those leaders who are legislatively constrained and therefore unable to raise taxes in order to execute the defense commitments that are required for the survival of their states (Thompson, 1974.)
Gold standards replaced gold-coin standards in the 17th-19th centuries in the West as the extent of defensive warfare expanded to where the gold-coin standards were no longer sufficient to the task. A similar history generated a gold standard in China from the 9th through the early 17th century.