# Why is gold considered a “standard”? [duplicate]

I'm not an economics guy but this question has been stuck in my head for days.

I wonder why gold is used as a "standard value thing". I mean, the value money goes up and down everyday, but gold never loses value. The value of things is up to the price of gold. Is it because of the amount of gold in this world is "limited" and has almost entirely been exploited?

I usually use gold to compare the price of stuff today with stuff in the past. For example in 1980 a normal car was \$246 = 123 ounce (assume that 1 ounce = \$2 in 1980), and today a car is worth \$162,249.3 = 123 * \$1319.1 (1 ounce = \$1319.1 in 2014) still 123 ounce / car. Does that mean gold never loses value?

And one more question, my friends said "If the population of this world, for some reason, is decreased by a half, the gold price will go down because human needs change when there are less people with more resources". Is that right?

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Gold never loses value? So that drop from \$1800 to \$1200 recently was what? –  JoeTaxpayer Feb 21 at 2:18
Gold varies in value much more than money. If I can buy something for \$100, it's highly likely that in a month I can buy that same thing for \$100 (unless it's gone on sale - in which case we say the price of the thing has changed, not that the value of money has changed). The value of gold will have varied much more than that. –  DJClayworth Feb 21 at 2:22
@JoeTaxpayer I'm sorry maybe I misunderstood. But I usually use gold to compare the price of today stuffs with the past ones. For example in 1980 a normal car is \$246 = 123 ounce (assume that 1 ounce = \$2 in 1980), and today a car is worth \$162,249.3 = 123 * \$1319.1 (1 ounce = \$1319.1 in 2014) still 123 ounce/car. Is that means gold is never loses value? Please correct me if I asked a dump question. –  TrungDQ Feb 21 at 3:10
No question is dumb. You made a remark, "gold never loses value." In just the last two years, it did just that. The cheerleaders trying to get you to buy at \$1800, because "the experts" see \$5000 gold in the near future. But then came \$1200. In 1980 a car cost 51*S&P, in '13, 17*S&P, about 3 cars for the same 51 S&Ps. There are many gold Q&A's here already. Welcome to Money.SE –  JoeTaxpayer Feb 21 at 3:57

## marked as duplicate by Chris W. Rea, Victor, Dheer, JoeTaxpayer, Nathan LFeb 21 at 17:49

Gold is not considered standard any more.

Gold and silver used to be a standard for monetary instruments, and governments would promise to redeem their money in gold/silver to the bearer based on a certain formula (e.g.: US\$1 = 1ozt silver). However, governments moved away from this coupling during the 20th century.

Gold (and silver) are just metals, and have no real relationship to the currency (or the population), and can definitely lose or gain value as any other commodity.

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Gold's real price is very stable over the long run, the recent monetary panics notwithstanding, probably more due to gold's conversion from currency to investment.

This site claims that gold has inflated in real terms since prehistory. Personally, I do not subscribe to its inflation method as all relative currencies should be chained as best as possible, and debt could keep the real price stable over the long run.

Gold has lost its preference as the monetary base because its extremely unstable vs a decently-managed banknote.

Since the Federal Reserve was primarily mandated to control inflation & unemployment, the real GDP volatility has plummeted despite a difficult birth and troubled childhood...and adolescence.

Gold standard

The gold standard was a promise by the US federal government to convert USD for gold, which was later abandoned for a non-demand convertible banknote backed only by the central bank's investments, which we have today.

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