gold standard

System under which a country's currency is exchangeable for a fixed weight of gold on demand at the central bank. It was almost universally applied 1870–1914, but by 1937 no single country was on the full gold standard. Britain abandoned the gold standard in 1931; the USA abandoned it in 1971. Holdings of gold are still retained because it is an internationally recognized commodity, which cannot be legislated upon or manipulated by interested countries.

The gold standard broke down in World War I, and attempted revivals were undermined by the Great Depression. After World War II the par values of the currency units of the International Monetary Fund (which included nearly all members of the United Nations not in the Soviet bloc) were fixed in terms of gold and the US dollar, but by 1976 floating exchange rates (already unofficially operating from 1971) were legalized.