Gold Points
Encyclopedia
Gold points was a term which referred to the rates of foreign exchange
likely to cause movements of gold
between countries adhering to the gold standard
.
, the concept determined that the fluctuating limits of currency
fixed the cost of money between the place where the bill was drawn and that in where it was payable. In the exchanges rates between gold-standard countries, these limits were known as the gold points, for the reason that, if the price of foreign bills rose above the upper limits determined by the exchange rate, countries would find it cheaper to export gold than to export bills for the purpose of settling international accounts. Conversely, if the exchange rate fell below the lower limit of the determined rate, countries would find it cheaper to import gold than to sell bills to foreign creditors.
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
likely to cause movements of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
between countries adhering to the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
.
Application
In accordance with the law of supply and demandSupply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
, the concept determined that the fluctuating limits of currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
fixed the cost of money between the place where the bill was drawn and that in where it was payable. In the exchanges rates between gold-standard countries, these limits were known as the gold points, for the reason that, if the price of foreign bills rose above the upper limits determined by the exchange rate, countries would find it cheaper to export gold than to export bills for the purpose of settling international accounts. Conversely, if the exchange rate fell below the lower limit of the determined rate, countries would find it cheaper to import gold than to sell bills to foreign creditors.
See also
- Gold standardGold standardThe gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
- A Program for Monetary Reform (1939) – The Gold Standard