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As one of the metallic elements in the earth's crust, gold is as old as the planet itself and is found and extracted on all continents. It is referred to by many as the king of metals and always has been assigned a role far beyond its value as a commodity.
Gold has been coveted by the great and wealthy from pharaohs to modern-day heads of state as a means of ostentation. It has been desired by the common folk for its beauty of appearance and beloved by goldsmiths for its splendid working qualities. Gold has provided material for great artists, novelists, and poets. And, over the years, it has been used to decorate cathedrals and palaces, to honor Olympic medalists and movie stars, and to celebrate 50th wedding anniversaries. Exemplifying supreme appeal and arousing human desire, this metal, above all others, has been used for centuries as a medium of exchange, a measure of value, and a store of wealth.
The gold you see in the vault of the Federal Reserve Bank of New York attracts more than 20,000 visitors a year. It is the world's largest accumulation of gold and belongs to approximately 60 foreign central banks and international monetary organizations. Only a very small portion of this gold belongs to the U. S. Government. The Federal Reserve Bank does not own the precious metal but serves as guardian for the nations and international organizations that choose to leave their monetary gold reserves in custody with it.
This (1998) FRB publication outlines the history of gold and explores its financial significance and the unique role of the Federal Reserve Bank of New York in storing and safeguarding the exquisite metal.
LE GRAND MYSTIQUE
One of the oldest civilizations known to man, the Sumerians of Mesopotamia, who lived in what is modern-day Iran and Iraq, first used gold as sacred, ornamental, and decorative instruments in the fifth millennium B. C. Around the same period, the early Egyptians the richest gold-producing civilization of the ancient world began the art of gold refining. Like the Sumerians, the Egyptians used gold primarily for personal adornment, rather than for monetary purposes, although the kings of the fourth to sixth dynasties (c. 2700-2270 B.C.) did issue some gold coins.
The first large-scale, private issuance of pure gold coins was under King Croesus (560-546 B.C.), the ruler of ancient Lydia, modern-day western Turkey. Stamped with his royal emblem of the facing heads of a lion and a bull, these first known coins eventually became the standard of exchange for worldwide trade and commerce. Following the collapse of the Lydian Empire in 546 B. C., the Persians gained control of Asia's richest gold sources, which gave it far greater power in the world. The standard gold coin of the Persian Empire was the daric, named after Darius the Great (521-486 B.C.). Alexander the Great of Macedonia (336 B.C.-323 B.C.) subsequently established a rival coinage system that served as one of the important factors in his conques of Persia and the movement of gold into Europe. Later, Emperor Augustus (31 B.C.-A.D. 14) was the first Roman to establish a golden currency, known as the aureus, which helped spur the dynamic expansion of the Roman economy.
By the time the Roman Empire collapsed in the 5th century, gold had been used as both a tool of trade and a means to accumulate wealth for many hundreds of years. For medieval Christianity, though, gold remained a mystical symbol of eternity and light, as represented in such objects as crowns, halos, and altars.
During the 16th century, as the New World was being explored, gold currencies became prevalent in Europe. After Christopher Columbus landed in the Americas in 1492, other expeditions set sail to uncover the gold treasures rumored to lie in these distant lands. King Ferdinand V of Spain issued the order, "Get gold, humanely if you can, but at all hazards get gold."
As history has shown, humanity was of secondary concern. By 1521, Spain had overthrown the Aztecs, and Mexico, with its vast stores of gold, became part of the Spanish Empire. Soon thereafter, Spanish explorers conquered the gold-rich Inca civilization of Peru and destroyed its golden sun temples, which were covered in ornaments of dazzling beauty.
Although they acquired immense wealth, the Spaniards continued their quest. The myth that gold was created by the striking of the sun's powerful rays against mud led the Spanish Conquistadors to search in areas where wide tropical rivers flowed. Soon, rumors began to circulate of a fabulous city along the equator El Dorado where the houses and lake were made of solid gold and the people wore fabrics of gold.
As these stories spread, other Europeans began to finance expeditions in search of the great source of gold proclaimed to lie somewhere in South America. Sir Walter Raleigh, the British explorer, obtained a special grant from Queen Elizabeth I in the late 1500s that allowed him to search for the mysterious South American city. Raleigh, after returning empty-handed, wrote a book, The Discoverie of the Large, Rich and Beautiful Empire of Guiana, detailing everything known about the great city. Although no one ever discovered such a city, belief in the legend kept searches going for centuries.
The great era of gold production that followed the discovery of the New World continued throughout the 17th, 18th, and 19th centuries. Gold rushes occurred in the 19th century when people, in search of instant fortune, flocked to California (1848), Australia (1851), South Africa (mid-1850s to the late 1880s), and the Klondike area of Canada along the Yukon River (1896). Today, according to the Gold Institute in Washington, D. C. South Africa is the largest supplier of gold, followed by the United States, Australia, the Commonwealth of Independent States (CIS), and Canada.
Although the role of gold in the world economy has declined over the last century, people are still intrigued by the power, mystery, and brilliance associated with the metal. Today, gold is no longer commonly used as money but continues to serve as an important store of value. When people are worried about political instability, war, or inflation, they often put their savings into gold.
THE GOLD STANDARD
The gold bullion in the Federal Reserve Bank of New York's vault is part of the monetary reserves of some 60 foreign governments, central banks, and official international organizations around the world. It is largely a relic of an era when the gold standard and gold exchange standard were used to establish the relative values of national currencies, and gold itself was used to meet international payments.
A currency on an unrestricted gold standard could be converted into gold at a fixed price regardless of the amount involved or the nationality of the currency's holder. Great Britain, through a series of laws passed between 1816 and 1821, became the first modern nation to link its money to gold in this way. Although the United States defined the value of the dollar in terms of gold and silver even earlier (the official price of gold was established at $19.75 a troy ounce by the Coinage Act of 1792), the government didn't adopt an exclusive gold standard until 1900. By 1905, most of the world's major trading countries had adopted the gold standard as well. --> next
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