Gold and silver were an integral part of
business and trade as far back as the early civilizations of
Sumer (the land between the rivers Euphrates and Tigris in
what is now Iraq) and Egypt.
The great French historian Fernand Braudel saw these precious
metals as the "lifeblood of Mediterranean trade in the
2nd millennium BC". Initially, however, they were traded
simply by weight in the form of ingots, which could then be
cut up into small chunks or drawn into wire. And the metals,
particularly silver, were regarded more as a standard of
accounting or for taxes to rulers or temples, rather than for
general circulation among the population.
The first real coins were not struck until the 6th century BC
in Lydia (Western Turkey). They were made from electrum,
natural alloy of gold and silver found in the rivers of the
region. They usually had a lion or a bull on one face and a
punch mark or seal on the other, and weighed from 17.2 grams
(0.55 troy oz) to as little as 0.2 grams (.006 troy oz). Their
introduction is attributed to the Lydian king Croesus (561-547
BC). Improvements in refining soon led to the distinct minting
of gold and silver coins.
Coinage was swiftly taken up in the blossoming Greek city
states just across the Aegean sea, though it was predominantly
of silver until Philip II of Macedon (359-336 BC) acquired
gold and silver mines in Thrace (now Bulgaria). His son,
Alexander the Great (336-323 BC) then consolidated the Greek
Empire with his conquest of the Persian empire, securing an
immense gold treasure built up by the Persians from gold
sources on the river Oxus in northern Afghanistan. Alexander
is reputed to have taken over 22 metric tonnes (700,000 troy
ounces) of gold coins in loot from the Persians. For both
Philip II and Alexander, gold coin became an essential way of
paying their armies and meeting other military expenses. Under
the Greek empire, the coins were stamped with the head of the
king instead of lions, bulls and rams that had previously
adorned gold coins elsewhere.
The Romans, for whom gold coins became the crucial way of
paying their legions, also adopted the custom of striking the
emperor's head on their gold aureus coin. The aureus was
usually 950 fine (22 carat) and weighed 7.3 grams (0.23 troy
oz); 45 aurei weighed one roman pound (libra).
Although this coin was too valuable for most daily
transactions, they were used by administrators, traders and
for army pay (a legionnaire was paid one aureus each month).
In Britain, one aureus bought 400 litres (28.57 gallons) of
cheap wine or 91 kilos (200 pounds) of flour. A smaller gold
coin, the solidus, weighing 4.4 grams (0.14 troy oz) was
introduced after 300 AD, as gold supplies from Spain and
Eastern Europe declined.
The Romans minted gold coins on a scale not seen before and
not equalled until modern times. Between 200 and 400 AD
hundreds of millions of coins were struck and distributed
throughout the empire. The extent of circulation is
demonstrated by the hoards of roman coins that have turned up
across Europe, particularly in Britain, which can be seen in
many museums, notably the British Museum in London.
The British Museum's HSBC Money Gallery provides a unique
display of the evolution of early gold coins.
The Roman empire brought a remarkable unity to much of western
Europe through coherent public institutions and coinage. When
that empire fell apart soon after 400 AD, it was almost one
thousand years before widespread gold coinage returned. The
solidus survived as the main gold coin of the Mediterranean
world, being minted by the Byzantine emperors in
Constantinople as the nomisma or bezant.
The bezant personified gold coinage from the fall of the Roman
empire until the rise of Venice with its famous gold and
silver ducats. "It is admired by all men and in all
kingdoms, because no kingdom has a currency that can be
compared to it," noted a 6th century observer. But due to
a shortage of new gold supplies, minting was very limited and
the coins were increasingly debased. By 1081 the gold content
was only 250 fine (six carats). The Emperor Comenus restored
some credibility in 1092 with a new coin of 4.4 grams (0.14
troy oz) called the hyperpyron, which many still nicknamed
bezant and the Venetians called perpero. The coin never
attained much prestige, however, as gold supplies were still
limited.
Indeed, much of the gold that was available from Africa after
700 AD went into dinars made by the rulers of the growing
Islamic empire that stretched through the Middle East and
along the north African coast. These gold coins, made
initially in Damascus, Baghdad and Tripoli, were beautifully
decorated by calligraphers in Arabic script, since Islam
forbade the depiction of people.
By 1200 the growing power of Venice brought more trade between
the Islamic world and Europe. That prosperity sucked in gold
that had long been coming across the Sahara desert by camel
caravans from West Africa to North Africa. Gold coins were
minted in Sicily, just across the Mediterranean, in 1231 using
African gold and then in Florence and Genoa in 1252. Venice
soon became the main market for gold, opening its gold mint in
1284. The next year the first gold ducat of 3.55 grams (0.114
troy oz) was struck; it was a symbol of wealth and power for
the next five hundred years, becoming the most widely accepted
coin since the Romans' aureus and solidus.
The supply of gold was enhanced soon after 1300 by new mines
in Hungary. Suddenly all Europe was making coins. In France
the king's mints produced nearly 10 tonnes (350,000 troy oz)
of coin in 1338-39. In 1344 the mints of Florence, Genoa,
Venice, Bruges (Flanders) and London coined over five tonnes
(170,000 troy oz) between them. The diversity of coins can be
seen in a single display case at the British Museum in London
which houses 25 types of gold coins from European nations and
city states minted during the 13th and 14th centuries.
As the pattern of gold supplies changed by 1500, first with
more gold moving directly from West Africa to Europe by sea
and then with the new sources in the Americas, so did coin
production. In 1457, Portugal issued a new cruzado coin made
of African gold. In England in 1489 Henry VII minted the first
sovereign of 15.55 grams (0.5 troy oz) at 958 fine (23
carats), valued at £1.00. By 1503 the mint in Seville was
handling gold from the Americas.
Thereafter much of that gold was made into Spanish crowns
which were exported to England, the Netherlands (under Spanish
rule), Genoa and Venice, where they were often recast into
local coinage. But the supply of South American gold was
relatively limited compared to the flood of silver so that,
during the 16th and 17th centuries, silver coinage was more
widespread in Europe than gold. In England, Queen Elizabeth I
did launch new gold angels and crowns in 1558 to restore the
prestige of gold coins which had been much debased by her
father Henry VIII, but coinage was usually under 300 kilos
(10,000 troy oz) annually. Silver coinage was in everyone's
purse.
Gold coinage made its comeback only after gold discoveries in
Brazil in the 1690s gave a new dimension to world production
and Britain moved onto an unofficial gold standard with gold
coins replacing silver as the main circulating currency (see
Millennium in Gold - 17th & 18th centuries). Brazil's gold
was initially coined into moedas de ouro at mints in Rio de
Janeiro and Lisbon (Brazil being a Portuguese colony), but
much of this coin came on to England where it was recoined
into guineas, which had first been struck in 1663. The guinea,
named after Africa's 'gold coast', weighed 0.27 troy oz (8.7
grams) at 916.6 fine with a nominal value of £1. The mint in
London coined over 31 tonnes (one million troy oz) of gold
into guineas between 1713-16.
The new flow of gold coincided with a slight over-valuation of
gold, compared to silver, at the mint, which had followed a
major recoinage program a few years earlier. Thus, traders
found it profitable to send gold to be minted, while selling
silver for shipment to India and China where it was valued
more highly. The premium for gold coinage was confirmed in
1717, when Sir Isaac Newton, as Master of the Mint, set the
historic gold price of £4.4.11½d (£4.35) which lasted for
two hundred years. His action confirmed the preference for
gold coins and accidentally put Britain on a gold standard,
with gold forming the major coin circulation until 1914, when
World War I broke out.
Throughout the 18th century; huge quantities of guineas were
put into circulation, with the mint often striking three to
four million annually; virtually no silver was coined. Not
since Roman times had gold been so widely used and accepted
both in Britain and abroad, although most other nations stayed
with silver coinage.
The sovereign, which replaced the guinea under the Coinage Act
of 1816, made the gold standard official. The sovereign, of
0.25 troy oz (7.77 grams) at 916 fine, was the sole standard
of value and had unlimited legal tender.
The final triumph for gold coinage followed the gold rushes in
the United States and Australia after 1848, as gold production
rose five-fold. Gold coin minting soared in France and the
United States in the 1850s and ultimately most nations
switched from silver to gold coinage by 1900, when the United
States finally switched to the single gold standard from a
bimetallic gold and silver policy.
Virtually all gold mined during the 19th Century was turned
into coins. Sovereigns in Britain and Australia, Eagles in the
United States, Marks in Germany, Roubles in Russia, Crowns in
Austria, Florins in Hungary and Napoleons in France accounted
for over 13,000 tonnes (418 million troy oz) in the classic
period of the gold standard prior to World War I. But when the
world went to war in 1914, governments started to husband
their gold, the minting of gold coinage largely stopped and
coins were often called in.
In 1933 during the Great Depression, the U.S. recalled all
gold and gold coins from their citizens. After that, the era
of almost universal gold coinage was over.
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