According to Merriam-Webster, “money” is: “something generally accepted as a medium of exchange, a measure of value, or a means of payment.” Money, in its various forms, also serves as a store of value. Gold has maintained the store of value function all though the past centuries, including our own times; as an investment, gold has done well in the past couple of decades. I plan to write more later on the investment aspect, but here I focus on the use of physical gold as a means of payment or exchange, or as backing a means of exchange.
Gold, typically in the form of standardized coins, served means of exchange function for thousands of years. Starting in the Renaissance, however, banks started issuing paper certificates which were exchangeable for gold. For daily transactions, the public found it more convenient to handle these bank notes than the gold pieces themselves, and so these notes were used instead of gold as money.
In the late nineteenth and early twentieth centuries, leading paper currencies like the British pound and the U.S. dollar were theoretically backed by gold; one could turn in a dollar and convert it to the precious metal. Most countries dropped the convertibility to gold during the Great Depression of the 1930’s, so their currencies became entirely “fiat” money, not tied to any physical commodity. For the U.S. dollar, there was limited convertibility to gold after World War II as part of the Bretton Woods system of international currencies, but even that convertibility ended in 1971. In fact, it was illegal for U.S. citizens to own much in the way of physical gold from FDR’s (infamous?) executive order in 1933 until Gerald Ford’s repeal of that order in 1977.
So gold has been essentially extinct as active money for nearly a hundred years. The elite technocrats who manage national financial affairs have been only too happy to dance on its grave. Keynes famously denounced the gold standard as a “barbarous relic”, standing in the way of purposeful management of national money matters.
However, gold seems to be making something of a comeback, on several fronts. Most notably, several U.S. states have promoted the use of gold in transactions. Deep-red Utah has led the way. In 2011, Utah passed the Legal Tender Act, recognizing gold and silver coins issued by the federal government as legal tender within the state. This legislation allows individuals to transact in gold and silver coins without paying state capital gains tax. The Utah House and Senate passed bills in 2025 to authorize the state treasurer to establish a precious metals-backed electronic payment platform, which would enable state vendors to opt for payments in physical gold and silver. The Utah governor vetoed this bill, though, claiming it was “operationally impractical.”
Meanwhile, in Texas:
The new legislation, House Bill 1056, aims to give Texans the ability, likely through a mobile app or debit card system, to use gold and silver they hold in the state’s bullion depository to purchase groceries or other standard items.
The bill would also recognize gold and silver as legal tender in Texas, with the caveat that the state’s recognition must also align with currency laws laid out in the U.S. Constitution.
“In short, this bill makes gold and silver functional money in Texas,” Rep. Mark Dorazio (R-San Antonio), the main driving force behind the effort, said during one 2024 presentation. “It has to be functional, it has to be practical and it has to be usable.”
Arkansas and Florida have also passed laws allowing the use of gold and silver as legal tender. A potential problem is that under current IRS law, gold and silver are generally classified as collectibles and subject to potential capital gains taxes when transactions occur. Texas legislator Dorazio has argued that liability would go away if the metals are classified as functional money, although he’s also acknowledged the tax issue “might end up being decided by the courts.”
But as Europeans found back in the day, carrying around actual clinking gold coins for purchasing and making change is much more of a hassle than paper transactions. And so, various convenient payment or exchange methods, backed by physical gold, have recently arisen.
Since it is relatively easy and lucrative to spawn a new cryptocurrency (which is why there are thousands of them), it is not surprising that there are now several coins supposedly backed by bullion. These include include Paxos Gold (PAXG) and Tether Gold (XAUT). The gold of Paxos is stored in the worldwide vaults of Brinks, and is regularly audited by a credible third party. Tether gold supposedly resides somewhere in Switzerland. The firm itself is incorporated in the British Virgin Islands. Tether in general does not conduct regular audits; its official statements dance around that fact. These crypto coins, like bullion itself or various funds like GLD that hold gold, are in practice probably mainly an investment vehicle (store of value), rather than an active medium of exchange.
However, getting down to the consumer level of payment convenience, we now have a gold-backed credit card (Glint) and debit card (VeraCash Mastercard). Both of these hold their gold in Swiss vaults. The funds you place with these companies have gold allocated to them, so these are a (seemingly cost-effective) means to own gold. If you get nervous, you can actually (subject to various rules) redeem your funds for actual shiny yellow metal.
Economist Writing Every Day 