|
Information > Financial Terms > This page Gold Points The gold export and gold import points that, before nationalization and the advent of the international gold exchange standard supervised by the INTERNATIONAL MONETARY FUND (IMF), fixed respectively the upper and lower limits to the range of open FOREIGN EXCHANGE markets for a particular currency in terms of another currency. Gold then could be bought for the account of private banks and firms as compared with movements of gold under the IMF system for official accounts only (governments and government official agencies). Consequently, whenever the market rate of exchange rose to a point where it would be cheaper for importers to export gold than to buy exchange, the gold export point was reached. Under ordinary conditions, the gold export point on a foreign currency represented that premium over the par of exchange at which it was cheaper to ship gold than to pay the premium for the foreign exchange. On the other hand, when the rate of exchange declined to a point where it was cheaper for foreign importers to buy and ship gold than to remit in exchange at the low rate per unit of their currency, the gold import point was reached. In practice, international banks handled the movements of gold whenever they occurred for private accounts, but since the gold points marked the limits of fluctuation in rates in the foreign exchange market, there would under ordinary circumstances be little nonspeculative reason to ship gold, except on occasions of capital flights from unstable currencies. Back to Information
|