The History of Trading Gold: The California Gold Rush – Now

When we left off in our last article about the history of trading gold, John Marshall began the California Gold Rush, spurred by his finding of gold flakes at Sutter’s Mill near Sacramento, California. From that time forward, men and women alike sought to make their fortune with gold.

Due to some of the lack of success in the gold rush, United States settlers began looking elsewhere for gold, some traveling to Australia, and some to South Africa. Both countries were home to some of the precious rock, but South Africa had a wealth of gold, which was discovered in 1868 by George Harrison and since that time, it became the source of 40% of all gold ever mined.

In 1873, the United States eliminated silver as a monetary standard, leaving gold as the sole standard for all U.S. currency. The rush to find gold was even greater now. The last gold rush of the century began in 1898 when two prospectors discovered gold in Klondike, Alaska while fishing, leading another mass exodus to the frigid, northern area. (Note: Alaska was not an official state of the United States until 1959).

Because of the mass findings of gold in the years preceding, the United States created a fixed exchange rate for all gold trade with other countries in 1900, a major step in the use of gold for currency.

World War I, which began in July of 1914, marked a turbulent time for the gold trade. Many countries, including the United States and Great Britain, suspended a strict gold standard. This was due largely in part to the turbulent relations between countries.

Though the regular standard normalized gradually upon the ending of the war in 1918, it did not stay that way for long. As the Great Depression hit from 1929-1939, President Franklin Delano Roosevelt banned private holdings of gold bullions and certificates in an effort to resolve the banking crisis. The Gold Reserve Act of 1934 gave the government all holdings of monetary gold and stopped all minting of gold coins. Thus began the end of private holdings of gold and in 1942, President Roosevelt ordered the close of all private gold mines.

Though the actions of President Roosevelt seemed harsh at the time, it served a great purpose. The use of two monetary forms—the U.S. dollar and gold—caused turbulence in the banking systems, a problem that was not fully resolved until 1971 when the gold standard ended in the United States, and as of today, no nation uses gold as the standard in their monetary system.

Despite the fact that it no longer backs currency, gold has not lost its value. Rising and falling gold prices can still affect currencies in the foreign exchange market, so it is still worth your time and notice today.