Richard Nixon ended the gold standard in 1971. At the time gold was pegged at $35 per ounce. Countries who sold goods to the United States would continually run trade surpluses. They would end up holding large supplies of dollars as a result. Eventually it became obvious that the US could not redeem all the dollars with gold, so country after country started converting their dollars into gold, thus drawing down the US gold stock. It was then that Nixon shut the gold window. The US would no longer exchange its dollars for gold. The world entered a period of generally floating exchange rates.
There are some that would love to return to some kind of gold standard. Very few professional economists would go along with this. The reason is because economists subscribe to the Quantity Theory of Money. This gets down in the weeds a bit, but let me explain this concept with the following formula:
MV = PY
where M = money supply
V = velocity of money
P = price level
Y = real GDP
Real GDP is growing globally. As a historical norm, V is relatively constant. If M is gold, we have a variable which is hardly growing at all. The fact that it has a high value is because of its scarcity. Now looking at the formula, if Y is globally increasing, P (prices) must be forced down. This would result in deflation which is an economy killer.
At the time of this writing, the spot gold price is $1314 oz.
