A gold standard ties money to metal at a set rate. In its strongest form, a paper bill could be handed in for a written weight of gold. That link held down how much money could be made relative to the gold a country had on hand. Different countries held the standard in different ways — some strict, some looser — but the common thread was that gold sat as the anchor behind the worth of the currency.

Those who favoured the standard liked it because it put a limit on the creation of money and made long-run worth easier to count on. It also gave countries a common reference for trading between their currencies, since each could be read back through the same metal. For savers and lenders, that discipline was often read as a good thing: it cut down on the pull to answer every trouble with more printed money.

Discipline was the gift, and the cost. The gold standard made hard money — and made hard times harder.

The cost of that discipline was stiffness. A country working under a gold standard had less room to answer a downturn, less room to step in during a banking panic, and a risk of falling prices when the gold on hand did not grow with the wider economy. Modern countries stepped away from the standard because they wanted more room to handle jobs, banking trouble, and wartime spending. The room solved some problems. It also took away the hard anchor gold had once given.

The classical gold standard ran from about 1870 to 1914. Currencies were tied directly to gold at set rates and ordinary citizens could hand in paper for metal. Bretton Woods, which ran from 1944 to 1971, was a more limited version. Only the United States dollar was tied to gold at thirty-five dollars an ounce. Other countries tied their currencies to the dollar. Foreign central banks could hand in dollars for gold, but citizens at home couldn't. As the United States ran deep shortfalls through the 1960s, foreign central banks built up dollars and began asking for gold. By 1971, the gold on hand in the United States no longer covered the dollar claims against it.

On the fifteenth of August, 1971, President Nixon closed the gold window. The dollar became a fully fiat currency, backed by the word of the government and the faith of the people who used it, not by metal. From 1971 to 2024, gold rose from thirty-five dollars an ounce to roughly three thousand dollars an ounce. The buying power of the dollar fell by something like eighty-five to ninety percent over that same stretch. That history is a core reason some households keep a small share of what they own in physical metal.