At the beginning of the 19th century, there were plenty of rich gold resources found in Russia, the United States, Australia, South Africa and Canada respectively. To promote the free flow of trade between imperial powers, the “Gold Standard Period” began as people started using gold as their primary currency for international settlement. Freely convertible, gold could be exported as an equivalent use of local currency.

At the end of the 19 century,most of the major countries in theworld launched the “gold standard”. Until the outbreak of World War I in 1914, it had already been implemented in 59 countries including the United States.Gold could be a freely convertible to different currencies under a strictly controlled official government market. Before World War I, the London gold market became the only international gold market.

Due to the impact of the global financial crisis in 1929, The Great Depression, governments from different countries strengthened their trade control by prohibiting free trade. Subsequently, British and the American governments officially abandoned the gold standard based on converting gold to local currencies.

The Period of the Bretton Woods Agreement

After the outbreak of World War II, the United States became the biggest beneficiary of the war and possessed more than 75% of the world's official gold reserves. In 1944, Britain, the United States and the representatives of 44 countries of the United Nations convened at a meeting in Bretton Woods, United States, signing the Bretton Woods Agreement. From there, gold was listed as part of the international monetary system as a method of international method of exchange. The U.S. government convened to peg the value of gold at US$ 35 per ounce.

With the “The Bretton Woods Agreement”, the U.S. dollar was centered at the International Monetary System which meant that the U.S. dollar became as valuable as an equivalent weight of gold. With the Bretton Woods Agreement, the U.S. government was obligated to convert the number of US dollars to an equal and certified amount of gold. Exchanging gold with only U.S. dollars meant that different countries could only conduct international transactions with gold. It is due to this restriction that U.S.dollars became a major reserve currency and a means of international settlement between various countries.

In 1944-1945, according to the Bretton Woods agreement, the World International Monetary System and the International Monetary Fund was established.

In 1968, the United Stateswas plunged into the Vietnam War. With a growing fiscal deficit, decreasing exports, tax revenues, increasing global competition and increasing prices in raw materials,Inflation in the U.S. could not be suppressed andit was widely expected that the US dollar was about toexperience a sharp depreciation.Since various countries converted U.S. dollars to gold with the U.S., it became increasingly difficult for the U.S. Government to live up to its commitment to maintain the fixed exchange rate between US dollars and gold.