Gold Points

the upper and lower limits of the fluctuation of the exchange rate around its gold parity level under the conditions of gold circulation and free movement of gold between countries. The gold points were defined by expenditures connected with the movement of gold between countries (transport and insurance).

The exchange rate of any currency under gold circulation and free import and export of gold could not exceed the upper gold point. Otherwise, the payer would benefit more, even considering the packing, mailing, insurance, and other expenses, by sending the gold to the creditor’s country and exchanging it there for the equivalent in the national currency in which payment was intended; in this way there would be an inflow of gold to the country of the given currency. A fall of the exchange rate of the national currency below the limit of the lower gold point could not occur, since at this limit it would be more beneficial to export gold from the country; that is, there would be an intensive outflow of gold. The lowest rate of exchange of the currency is sometimes called the export gold point, and the highest rate, the import gold point. With the repeal of the gold standard and the introduction of foreign exchange restrictions, the gold points ceased to have practical significance.