Gold has been a symbol of wealth and power throughout history. It has been a leading reason for colonial expansion. But the most important use of gold was felt when it was used as a monetary system called the gold standard.

The usage of gold as a monetary system was in the form of gold coin standard which came late in the seventh century BC in ancient Lydia. During the seventeenth and the eighteenth century countries began moving away from gold coins and began creating government notes that were backed by gold. Gold coin standard is nothing but governmental paper notes that are backed by gold.

In 1792, with the passing of the mint act, the adoption of the gold standard was made compulsory by the United States government. The United States dollar was backed by gold until 1862 and was reintroduced in 1878. The action of switching between the Gold standard and the Fiat money system continued until 1971.

Gold standard has some advantages. Since the money is backed by gold, the government has a large control on trade. Due to the government's manipulative behavior, depressions or boom cycles can result in economic collapse. The gold standard serves as a solid base in such situations since the government printed script is backed by a gold reserve.

Due to inflation, there has been an increase in greed and debauchery of the dollar which has resulted in the misallocation of capital. In such circumstances if you want to protect yourselves financially, the best way is to protect your interests by owning gold. This can be proved by referring to the well-documented research papers by Sinquefield and Ibbotson which shows the importance of precious metals such as gold. Investment in the gold standard certainly lowers your risk by increasing the return.

About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality financial tips like :
Payday Loan Tips and Us Gold Coins On eBay

Article Source: http://EzineArticles.com/?expert=Pauline_Go