how the gold standard works
the gold standard is a monetary system where a country s currency or paper money has a value directly linked to gold with the gold standard countries agreed to convert paper money into a fixed amount of gold a country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price that fixed price is used to determine the value of the currency for example if the u s sets the price of gold at 500 an ounce the value of the dollar would be 1 500th of an ounce of gold the gold standard developed a nebulous definition over time but is generally used to describe any commodity based monetary regime that does not rely on un backed fiat money or money that is only valuable because the government forces people to use it beyond that however there are major differences some gold standards only rely on the actual circulation of physical gold coins and bars or bullion but others allow other commodities or paper currencies recent historical systems only granted the ability to convert the national currency into gold thereby limiting the inflationary and deflationary ability of banks or governments 