Gold peg

Gold peg is a term for the par value in gold of a particular currency that is backed by a gold standard. Maintaining a particular stated gold price is considered a matter of confidence for a currency. A government devalues its currency if it increases what it will pay in that currency for a specified amount of gold. In European history, the unit of gold commonly specified is the troy ounce, with 12 troy ounces to a troy pound.

A peg is almost never exact, generally there is a trading range of gold to a currency.

Since the early 20th century the most important price for gold was the London Gold Fix which set the price for gold for physical settlement between five important market makers in London. While the spot price often differed from the Fix, it is widely quoted and used as a bench mark for futures prices and other settlements in gold.

There are a variety of reasons why a government or bank would want to devalue currency, either because of a desire to print more notes, or a lack of reserves to pay demands. A currency where gold is leaving the country is said to be "under pressure" and steps taken to keep the peg in place are said to be "defending" the currency. These terms have continued even after the international monetary standard is no longer based on specie.

Pegs exist in monetary policy that are not to gold, for example a dollar peg means that a currency is closely tied to the dollar.

This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.