If the exchange rate fluctuates beyond the gold delivery point due to the change of supply and demand, the cost of currency exchange is not as low as the cost of directly transporting gold and then converting it into other currencies, so the gold delivery point is the range of actual exchange rate fluctuation. However, when a large number of banknotes are issued, the nominal gold content does not match the actual gold content, the free exchange will be destroyed, and the exchange rate based on the gold delivery place will also be destroyed.
With the increase of gold output or input, it will reduce the pressure of supply and demand in the foreign exchange market, narrow the fluctuation range of the exchange rate, and gradually return to or close to the coinage parity, thus playing the role of automatically adjusting the exchange rate.
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Reasons for the collapse of the international gold standard
The gold standard has existed for about 100 years. The main reasons for its collapse are:
First, the growth rate of gold production is far lower than that of commodity production, and gold cannot meet the needs of expanding commodity circulation, which greatly weakens the foundation of gold coin circulation.
Second, the distribution of gold stocks in various countries is uneven. 19 13 At the end of the year, the United States, Britain, Germany, France and Russia accounted for two-thirds of the world's gold stock. Most of the gold stocks are held by a few powerful countries, which will inevitably lead to the destruction of the free casting and free circulation of gold coins and weaken the foundation of the circulation of gold coins in other countries.
Third, when the First World War broke out, gold was concentrated by the participating countries to buy arms, and stopped exporting freely and cashing bank notes, which eventually led to the collapse of the gold standard.
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