Gold and silver were an integral part of business and trade as far back as in the early civilisations of Sumer (the land between the rivers Euphrates and Tigris in what is now Iraq) and Egypt. The great French historian Fernand Braudel saw these precious metals as the "lifeblood of Mediterranean trade in the 2nd millennium BC". Initially, however, they were traded simply by weight in the form of ingots, which could then be cut up into small chunks or drawn into wire. And the metals, particularly silver, were regarded more as standard of accounting or for taxes to rulers or temples, rather than for general circulation among the population.

The first real coins were not struck until the 6th century BC in Lydia (Western Turkey). They were made from electrum, natural alloy of gold and silver found in the rivers of the region. They usually had a lion or a bull on one face and a punch mark or seal on the other, and weighed from 17.2 grams (0.55 troy oz) to as little as 0.2 grams (.006 troy oz). Their introduction is attributed to the Lydian king Croesus (561-547 BC). Improvements in refining soon led to the distinct minting of gold and silver coin.

Coinage was swiftly taken up in the blossoming Greek city states just across the Aegean sea, though it was predominantly of silver until Philip II of Macedon (359-336 BC) acquired gold and silver mines in Thrace (now Bulgaria). His son, Alexander the Great (336-323 BC) then consolidated the Greek empire with his conquest of the Persian empire, securing an immense gold treasure built up by the Persians from gold sources on the river Oxus in northern Afghanistan. Alexander is reputed to have taken over 22 metric tonnes (700,000 troy ounces) of gold coin in loot from the Persians. For both Philip II and Alexander, gold coin became an essential way of paying their armies and meeting other military expenses. Under the Greek empire, the coins were stamped with the head of the king instead of lions, bulls and rams that had previously adorned gold coin elsewhere.

The Romans, for whom gold coin became the crucial way of paying their legions, also adopted the custom of striking the emperor's head on their gold aureus coin. The aureus was usually 950 fine (22 carat) and weighed 7.3 grams (0.23 troy oz); 45 aurei weighed one roman pound (libra). Although this coin was too valuable for most daily transactions, they were used by administrators, traders and for army pay (a legionnaire was paid one aureus each month). In Britain, one aureus bought 400 litres (28.57 gallons) of cheap wine or 91 kilos (200 pounds) of flour. A smaller gold coin, the solidus, weighing 4.4 grams (0.14 troy oz) was introduced after 300 AD, as gold supplies from Spain and Eastern Europe declined.

The Romans minted gold coin on a scale not seen before and not equalled until modern times. Between 200 and 400 AD hundreds of millions of coins were struck and distributed throughout the empire. The extent of circulation is demonstrated by the hoards of roman coins that have turned up across Europe, particularly in Britain, which can be seen in many museums, notably the British Museum in London. The British Museum's HSBC Money Gallery provides a unique display of the evolution of early gold coin.

The Roman empire brought a remarkable unity to much of western Europe through coherent public institutions and coinage. When that empire fell apart soon after 400 AD, it was almost one thousand years before widespread gold coinage returned. The solidus survived as the main gold coin of the Mediterranean world, being minted by the Byzantine emperors in Constantinople as the nomisma or bezant. The bezant personified gold coinage from the fall of the Roman empire until the rise of Venice with its famous gold and silver ducats. "It is admired by all men and in all kingdoms, because no kingdom has a currency that can be compared to it," noted a 6th century observer. But due to a shortage of new gold supplies, minting was very limited and the coins were increasingly debased. By 1081 the gold content was only 250 fine (six carats). The Emperor Comenus restored some credibility in 1092 with a new coin of 4.4 grams (0.14 troy oz) called the hyperpyron, which many still nicknamed bezant and the Venetians called perpero. The coin never attained much prestige, however, as gold supplies were still limited.

Indeed, much of the gold that was available from Africa after 700 AD went into dinars made by the rulers of the growing Islamic empire that stretched through the Middle East and along the north African coast. These gold coins, made initially in Damascus, Baghdad and Tripoli, were beautifully decorated by calligraphers in Arabic script, since Islam forbade the depiction of people.

By 1200 the growing power of Venice brought more trade between the Islamic world and Europe. That prosperity sucked in gold that had long been coming across the Sahara desert by camel caravans from West Africa to North Africa. Gold coins were minted in Sicily, just across the Mediterranean, in 1231 using African gold and then in Florence and Genoa in 1252. Venice soon became the main market for gold, opening its gold mint in 1284. The next year the first gold ducat of 3.55 grams (0.114 troy oz) was struck; it was a symbol of wealth and power for the next five hundred years, becoming the most widely accepted coin since the Romans' aureus and solidus.

The supply of gold was enhanced soon after 1300 by new mines in Hungary. Suddenly all Europe was making coins. In France the king's mints produced nearly 10 tonnes (350,000 troy oz) of coin in 1338-39. In 1344 the mints of Florence, Genoa, Venice, Bruges (Flanders) and London coined over five tonnes (170,000 troy oz) between them. The diversity of coin can be seen in a single display case at the British Museum in London which houses 25 types of gold coin from European nations and city states minted during the 13th and 14th centuries (see Millennium in Gold - 13th & 14th centuries).

As the pattern of gold supplies changed by 1500, first with more gold moving directly from West Africa to Europe by sea and then with the new sources in the Americas, so did coin production. In 1457 Portugal issued a new cruzado coin made of African gold. In England in 1489 Henry VII minted the first sovereign of 15.55 grams (0.5 troy oz) at 958 fine (23 carats), valued at £1.00. By 1503 the mint in Seville was handling gold from the Americas. Thereafter much of that gold was made into Spanish crowns which were exported to England, the Netherlands (under Spanish rule), Genoa and Venice, where they were often recast into local coin. But the supply of South American gold was relatively limited, compared to the flood of silver so that, during the 16th and 17th centuries, silver coin was more widespread in Europe than gold. In England Queen Elizabeth I did launch new gold angels and crowns in 1558 to restore the prestige of gold coins which had been much debased by her father Henry VIII, but coinage was usually under 300 kilos (10,000 troy oz) annually. Silver coin was in everyone's purse.

Gold coin made its comeback only after gold discoveries in Brazil in the 1690s gave a new dimension to world production and Britain moved onto an unofficial gold standard with gold coin replacing silver as the main circulating currency (see Millennium in Gold - 17th & 18th centuries). Brazil's gold was initially coined into moedas de ouro at mints in Rio de Janeiro and Lisbon (Brazil being a Portuguese colony), but much of this coin came on to England where it was recoined into guineas, which had first been struck in 1663. The guinea, named after Africa's 'gold coast', weighed 0.27 troy oz (8.7 grams) at 916.6 fine with a nominal value of £1. The mint in London coined over 31 tonnes (one million troy oz) of gold into guineas between 1713-16.

The new flow of gold coincided with a slight over-valuation of gold, compared to silver, at the mint, which had followed a major recoinage programme a few years earlier. Thus, traders found it profitable to send gold to be minted, while selling silver for shipment to India and China where it was valued more highly. The premium for gold coin was confirmed in 1717, when Sir Isaac Newton, as Master of the Mint, set the historic gold price of £4.4.11½d (£4.35) which lasted for two hundred years. His action confirmed the preference for gold coin and accidentally put Britain on a gold standard, with gold forming the major coin circulation until 1914, when World War I broke out.

Throughout the 18th century huge quantities of guineas were put into circulation, with the mint often striking three to four million annually; virtually no silver was coined. Not since Roman times had gold coin been so widely used and accepted both in Britain and abroad, although most other nations stayed with silver coinage.

The sovereign, which replaced the guinea under the Coinage Act of 1816, made the gold standard official. The sovereign, of 0.25 troy oz (7.77 grams) at 916 fine, was the sole standard of value and had unlimited legal tender.

The final triumph for gold coinage followed the gold rushes in the United States and Australia after 1848, as gold production rose five-fold. Gold coin minting soared in France and the United States in the 1850s and ultimately most nations switched from silver to gold coinage by 1900, when the United States finally switched to the single gold standard from a bimetallic gold and silver policy.

Virtually all gold mined during the 19th century was turned into coin. Sovereigns in Britain and Australia, eagles in the United States, marks in Germany, roubles in Russia, crowns in Austria, florins in Hungary and napoleons in France accounted for over 13,000 tonnes (418 million troy oz) in the classic period of the gold standard prior to World War I. But when the world went to war in 1914 governments started to husband their gold, coinage largely topped and coins were often called in. The era of almost universal gold coinage was over.

See also Coins Today, Millennium in Gold and Gold Library/History.