The 6 Different Types of Gold Standard Explained

Last Updated on May 6, 2025

Did you know there are actually 6 different types of gold standard?

These are:

• the 100% gold standard
• the gold price rule
• the gold certificate reserve
• the classical gold standard
• the gold exchange standard
• the shadow gold standard.

All are significant in the history of gold.

You often hear people mention the gold standard. Perhaps you even throw that term around yourself from time to time.

It’s helpful to know the nuances of each if you ever enter into discussion about the gold standard.

As Joseph T. Salerno explains in Money, Sound and Unsound:

“The monetary reformer intent upon presenting the case for the gold standard confronts another problem created by the very ambiguity attaching to the term gold standard. This stems from the fact that the term has been used very loosely to denote a number of diverse historical monetary systems and monetary reform proposals in which gold is a key element. Since these gold-based monetary systems differ in much more than minor details, it behooves the monetary reformer—in order to avoid misinterpretation and misplaced criticism—to carefully specify the precise nature of the “gold standard” he is proposing.”

Quite often both hard money advocates and their critics don’t fully understand the nature of what they are either advocating for or arguing against.

By the end of this post, you will be one of the few who understand the nuances of the different types of gold standard.

It’s also important to be aware of the various gold standard systems if, in the future, the government ever decides it wants to adopt one of them. You will then be able to know whether it is a genuine or pseudo adoption of gold.

1. The 100% Gold Standard

The 100% gold standard is favoured by Salerno himself and is probably the easiest one to understand.

In this system there is a complete separation of money and state.

The market chooses the medium of exchange, which here is assumed to be gold, with the monetary unit also being chosen by the market e.g. ounce or gram etc.

Therefore the total quantity of the money supply would be the sum total of the weight of gold held by the market.

Under the 100% gold standard money is simply gold and nothing else.

Private mints would coin the money in whatever shapes and weight the market desired.

Notes could be issued by private warehouses where people store their gold and could be traded. But these would be money substitutes, and not considered money themselves. They would not be an addition to the money supply. The notes would only be able to be issued when gold was deposited and would not be able to be issued in excess.

Salerno explains that this is because this would be the nature of the contractual terms:

“A money warehouse operating on the free market is contractually obligated to always maintain in its vaults the entire amount of its depositors’ gold. Loaning part of it out at interest to a third party obviously constitutes an infringement of its contractual agreements. Now things do not change just because the warehouse receipts or money certificates issued by the firm to its depositors, which entitle them to take physical possession of their gold as per terms of the contract, come to be used as money substitutes in exchange.”

2. The Gold Price Rule

In contrast to the 100% gold standard where money and state are completely separate, the gold price rule is a government system that utilises gold in order to improve their monetary policy.

In this system, paper currency would not be defined as a particular weight of gold. It would still be a purely fiat currency.

Instead gold is supposed to act as a signal to the central bank regarding the supply and demand of money and becomes a tool to help them maintain price stability.

Salerno explains:

“Basically, under a gold price rule, the Fed is charged with fixing the dollar price of gold. However, gold itself is not money but the “external standard” whose price the Fed is to fix in terms of the existing fiat dollar…All that is required of the Fed is that it sell some assets for dollars on the open market when the price of gold rises, thus deflating the supply of money and bringing the gold price back to its “target” level. If the price of gold begins to fall, the Fed is to purchase gold or other assets on the market, creating an inflation of the supply of dollars that drives the price of gold back up to its target level. By using the gold price as a proxy for the general price level, the advocates of a price-rule regime thus hope to stabilize the purchasing power of the fiat dollar.”

This is essentially the system that was designed at Bretton Woods and was in play from 1946-1971. The US fixed the price of gold at $35 per ounce, while printing a lot of fiat currency and not allowing citizens to convert their paper notes to gold.

This is also the method Russia used when creating the Moscow World Standard in 2023 by fixing the rouble to gold at 5000 roubles/g.

Read More: What Is The Moscow World Standard?

3. Gold Certificate Reserve

The gold certificate reserve system is where the central bank is legally required to maintain a certain amount of gold relative to the amount of notes issued. In other words it has to “back” its note issues with gold.

This existed in the US alongside the gold price rule until 1968. The Fed was required to have a 25% reserve requirement until President Johnson abolished it in a little known precursor to President Nixon’s famous 1971 move.

Salerno savages the idea of the gold certificate reserve:

“Advocates of a gold standard…should find little to be pleased about in this proposal because a gold-certificate reserve requirement is not a genuine gold standard at all. Under the gold standard, the monetary unit is a weight unit of gold; under [this] plan, gold is not money but a reserve commodity which is supposed to restrain the creation of government fiat money. Furthermore, since [this] proposal leaves untouched the government monopoly of the money supply, it is unreasonable to expect that the gold-certificate reserve requirement, even if enacted, would long serve as a bulwark against inflation. The most likely prospect is that it would be gradually reduced and finally eliminated altogether, no doubt in the wake of a series of “emergencies.”

4. The Classical Gold Standard

The classical gold standard is the system that the world used between the 1870s and 1914 and is what most people are actually referring to when they talk about a gold standard.

In this system the monetary unit is gold and paper currencies are defined as fixed weights of gold.

Therefore the price of gold is not fixed in terms of dollars, rather the value of the fiat currency is fixed to a certain weight of gold.

For example in 1913 Britain defined her currency as £4.25 per ounce of gold. The USA defined her currency as $20.67 per ounce of gold.

Essentially this makes central bank currency a warehouse receipt, similar to the scenario in the 100% gold standard.

The key difference is that in the 100% gold standard system everything was private whereas the classical gold standard accepts the existence of a monopoly central bank and national paper currency.

Salerno explains the importance of this distinction:

“When a central bank was granted the legal or de facto monopoly of warehousing the gold deposits of the public, its notes and deposits were no longer treated as instantaneously redeemable property titles to the actual money commodity housed within its vaults. The gold now became subsumed under the general category of central bank “assets” serving as “reserves” against its issue of instantly maturing “liabilities,” i.e., notes and deposits.”

The classical gold standard is the closest thing to sound money we have had in modern history.

But the government control of the system means that it existed entirely at the mercy of the state. History shows us that this is a tenuous existence. In 1914, at the outbreak of World War One, the classical gold standard was abandoned because it was too much of a handbrake on government spending and the war then became funded by the printing press.

Read More: The Classical Gold Standard

Read More: 5 Lessons From the 1897 Russian Gold Standard

5. The Gold Exchange Standard

The gold exchange standard is what Britain established when it returned to gold in the 1925, after World War One. Salerno calls it an “attenuated” version of the gold standard, while Murray Rothbard calls it a “sham.”

Britain had suffered immensely during the war and her finances were in disarray. The financial power had shifted to the USA and she looked back at the classical gold standard with nostalgia.

So it was decided that Britain would return to the gold standard at the prewar rate, not accounting for all the money printing that had happened in between.

Rothbard explains that this not really a return to the gold standard at all:

“They were attempting to clothe themselves in the prestige of gold while trying to avoid its anti-inflationary discipline. They went back, not to the classical gold standard, but to a bowdlerized and essentially sham version of that venerable standard.”

What made the gold exchange standard different was that pound sterling could be exchanged only for gold bars of a minimum of 400oz, not gold coin. And there was no redemption to British residents.

Rothbard explains further:

“Under the old gold standard, the nominal currency, whether issued by government or banks, was redeemable in gold coin at the defined weight. The fact that people were able to redeem in and use gold for their daily transactions kept a strict check on the overissue of paper. But under the new gold standard, British pounds would not be redeemable in gold coin at all but only in “bullion” in the form of bars worth many thousands of pounds. Such a gold standard meant that little gold would be redeemed domestically at all. Gold bars could not circulate for daily transactions. They could be used solely by wealthy international traders.”

The Chancellor of the Exchequer persuaded the bankers to discourage the use of gold and they were only too happy to comply. They were particularly worried about the “irresponsible public” and “sound currency fanatics.”

According to Rothbard:

“The purpose of redemption in gold bullion, and only to foreigners, was to take control of the money supply away from the public and to place it in the hands of the government and central bankers, permitting them to pyramid monetary expansion upon the gold centralized in their hands.”

This mechanism allowed for Britain and other countries holding British reserves to pursue monetary policy that significantly inflated the monetary supply.

When you hear commentators blame gold for the Great Depression, it is worth remembering that it was the “sham” Gold Exchange Standard that was in place at the time. Not the classical or 100% gold standard.

6. The Shadow Gold Standard

The shadow gold standard is a term coined by Jim Rickards to describe the current monetary system we have.

In this fiat system central bankers and governments pretend gold is unimportant but in reality gold silently gives backing and confidence to fiat currency.

It isn’t a gold standard in the same way as the other systems described in this post because there is no formal recognition of gold. But nevertheless it is an accurate description of the state of affairs we have today.

Jim Rickards explains in The New Case For Gold:

“It is generally believed that President Nixon closed the gold window on August 15, 1971, and the United States has been off the gold standard ever since. And two generations of students have since been rigorously conditioned by policy makers and professors to believe that gold has no role in the international monetary system. The truth is, gold has never gone away. The power elites stopped talking about it and publicly ignored it, yet they held on to it. If gold is so worthless, why does the United States have more than eight thousand tons? Why do Germany and the IMF keep approximately three thousand tons each? Why is China acquiring thousands of tons through stealth and Russia acquiring more than one hundred tons a year? Why is there such a scramble for gold if it has no role in the system? It’s highly convenient for central bankers to convince people that money is unconnected to gold because that empowers them to print all the money they want. Everyone from Ben Bernanke to Alan Greenspan and others have disparaged gold, saying it plays no part in the system. Along with the power to control money comes the power to control behavior and politics. Still, gold is the foundation, the real underpinning, of the international monetary system.”

Read More: Why Gold Is Important To The Economy and Monetary System

Conclusion

Of all the different types of gold standard there is only one that is a true gold standard with the separation of money and state. That is the 100% gold standard.

All other gold standards have some degree of government control. Of those, the classical gold standard is the best because gold is still the monetary unit and paper currencies are defined weights in gold.

The classical gold standard worked very well for a number of decades and is what most people are referring to when they talk about a gold standard.

The other systems – the gold price rule, the gold certificate reserve, the gold exchange standard and the shadow gold standard all have significant flaws where gold does not operate as money in the true sense.

While they may have advantages over unrestrained fiat money, they should not really be seen as a gold standard at all.

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Sources

Rickards, James. 2019. The New Case for Gold. London: Penguin Business.

Rothbard, Murray N. 2005. A History of Money and Banking in the United States : The Colonial Era to World War II. Auburn, Ala.: Ludwig Von Mises Institute.

Salerno, Joseph. 2011. Money, Sound and Unsound. Auburn, Ala.:Ludwig von Mises Institute.