Since the dawn of civilization, gold, silver, and other precious metals have been regarded by investors worldwide as a unique store of value. Gold coins have been found dating back as far as 800 BC, and for much of human history, governments maintained investor confidence in paper currencies by using “the gold standard”–in which holders of paper notes could freely convert them to gold at a fixed price.
The gold standard was used in the United States from 1900 to 1971, and during that time, foreign governments and their central banks (but not individual U.S. citizens) could freely swap their U.S. dollars for gold held at the Bullion Depository near Fort Knox, Kentucky. Over time, however, gold mine production could not keep pace with growth in the money supply. In 1971, mounting redemption requests forced President Nixon to close the Treasury Department’s “gold window,” ending the convertibility of the U.S. dollar into gold bullion.