Italpreziosi S.p.A Gold in the course of history

GOLD IN THE COURSE OF HISTORY
It's six thousands years that gold is mined and about 135.000 tons have been produced - approximately 2.400 tons are mined every year. Many nations have clashed because of gold and men faced a lot of dangers to own it . Physical properties, such as brilliance, malleability and virtual indestructibility, have enabled gold to play a special role in the human history, so, over the centuries, gold has been valued for its beauty and rareness. The most ancient gold objects, dating back to 5.000 b.C., are Egyptian, as at the beginning gold was used for the fabrication of ornaments and jewellery. The best civilizations in the fabrication of gold objects were the Etruscan and the Roman ones. Since its discovery, this metal performs a monetary function and over several milleniums it was considered the most important and the safest way of payment. Gold began to be fully used as currency in 1816 in England, which had adopted the "Gold Standard" system. Then, England was followed by other countries (Germany in 1872 and the United States in 1900). By this system, national currencies were convertible into gold. Mintage was free and gold could be freely imported and exported, both in form of coin or of raw gold. The exchange rate among currencies from different countries remained stable as it could change only within the limits of a fixed parity, ensuring the balance of the international trade, besides the exchange stability. The beginning of the First World War marked the end of the gold system and then there was a period of great instability. In 1925 Great Britain and in 1927 France re-established the prewar system and the central banks put gold reserves beside some convertible currencies (US Dollars, Pounds, French Franc, and so on), giving rise to the "Gold Exchange Standard". Thus, some currencies were declared to be directly convertible into gold, whereas other currencies (such as the Italian Lira) were not directly convertible into gold but into the so-called hard currencies, as they could be convertible. In 1931 England suspended currency convertibility and in 1934 the United States of America stated that the private persons could not convert Dollars into gold any more. In 1944, on the initiative of the United States and of England, the representatives from 44 countries met in Bretton Woods, where the International Monetary Fund (IMF) was created and the metal price was fixed at 35$ per ounce: the United States undertook to buy gold at this price from anyone and to sell it only to central banks. Every participating country was forced to pay an amount of gold and of national currency, declaring the parity between that currency and gold or, indirectly, dollar. In 1948 France was the first country to legalize gold negotiation, followed in 1951 by Switzerland, a country without import-export barriers. In 1954 London market reopened and in the 1960s there was a balance break between supply and demand, as the weighty dollar crisis led several dealers to make large purchases of gold. This was the first time that gold played the role as one of the shelter goods in front of the dollar instability. The day 17th March 1968 can be considered the official date for the birth of the gold market, whose price was determined by the law of supply and demand. On August 15th 1971, under the Presidency of Richard Nixon, the government of the United States abolished convertibility between dollar and gold: so, one of the pillars of the Bretton Woods system crumbled. Later, Nixon devalued twice the dollar parity towards gold. As dollar was no longer convertible into gold, in 1973 the European governments asked the USA to abolish the official gold market (the dollar parity towards gold) in order to sell gold on the free market. In 1976 the countries which were members of the IMF decided officially the abolition of the official gold price and, thus, of the double market of the metal. By virtue of this agreement, the IMF repaid a part of the gold reserves to the countries which had deposited them and sold another part of them to help developing countries. By this way, gold lost its function as foundation of the international monetary system and the current system is based on the USdollar ("Dollar Standard"). Thanks to the liberalization of gold market the price of this metal reached 200$ per ounce in 1975, the year which the sales of the American Treasury began in. In March 1979, with the birth of the European monetary system, it was decided that the Member States should pay 20% of their gold reserves and 20% of their dollar reserves in exchange for ECU. Therefore, the gold-based ECU enabled all the central banks to use their gold reserves. Even though gold does not sparkle any more in the last years as before and its monetary function has dulled so much that it lost the central position, this metal continues being important because it is considered the last resort asset, which can be used in case of necessity as income or in support of the currency.

FUNCTIONS OF GOLD
Gold performs primarily three functions: as money, as investment and as one of the most interesting consumer goods:

Thanks to its features such as transportability, resistance to corrosion, divisibility, immediate recognizability and fungibility, gold has been preferred to other metals to be transformed into money. The first use of a gold coin is attributed to Chinese, whereas in the Western countries it dates from the 7th century b.C., in the days of King Croesus from Lydia (the present Western Turkey).
Gold becomes a reserve when it is used as financial business, mantaining its value in the course of time. For the Central Banks, gold reserves perform a function of guarantee in front of the issue of money and debts, besides serving as last chance reserve. “On the contrary, private persons possess gold with a view to middle/long-term investment, in order to protect themselves against devaluations and economic-political uncertainties.” (Landi). Moreover, gold offers security and soundness to the investor, its value is universal and easily convertible into cash at any moment. Speculative transactions of non-physical gold (financial gold and its by-products) take place when you are trying to make profits by the price fluctuations of the metal. Anyway, gold producers and those who work it have recourse to by-products for reasons of coverage of risks too. The third function of gold is that as one of the most interesting consumer goods for industrial use, for jewellery, electronics and dentistry. Jewellery serves as investment (according to countries and historical periods) and also for one's private use, offering the person who owns it the pleasure to put it on. Use of gold in electronics is due to its features of good electricity conductor. Thanks to its resistance and to low risks for human health, gold is used in the medical field, especially in the dental one.