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Can Gold be Used as a Currency?

Can gold be used as a currency?

It is always worth considering that anything can fulfil the basics of trade, as bartering has proved through centuries. The basic proviso is that as long as the person you are trading with is happy with what you are offering in trade, than the barter can work.  In this arena, we can certainly that the store of wealth mechanism of gold can be realised, just as much as if you were to sell gold.

What is the difference between barter and a currency?

However, currency is a little different, it is a store of value that has a definition of that value that is commonly agreed and is used as a proxy or intermediary for the value of work or goods in a transaction. In this way gold, with a known value by weight is a financially sound currency.

Gold vs fiat currency

Unlike a fiat currency such as pound sterling or the US Dollar however, gold has a value of its own, that is not illusory or based on an intangible. Gold is real, and its value, although sharply increased over the past 40 years, has outlasted countless dynasties and rulers with value intact.

However, gold is rarely used as a method of payment outside of certain nations in Asia and Africa. It's use as a currency is often the preserve of turbulent regions and failed states. It achieves this feat, precisely because of its value in facilitating trade when internal order is broken down.

Taking gold coins at face value

In western countries, and others such as China, gold coins are issued by governments and often hold a transaction face value that is below the cost of the metal included in the coin.

Whilst this coin will often be accepted at its face value as legal tender, it would be a poor investment choice given the current market price of the base metal contained within. In this context however the gold is being used directly as a currency. However in this fiat form it is not having its true value recognised.

Realising the value of gold by selling gold coins

The easiest way to use a coin or other gold is to see the gold as guarantor of the ability to pay and use the time between the time of purchase and delivery to contact a company that can help you sell gold. Using an established business such as The Gold Bullion Company will ensure you get a good price for you gold and can convert you investments to cash to complete your transaction.