From Gold to Algorithms: The Story of Forex

Before travelers swiped credit cards or checked apps for exchange rates, global trade was a physical, heavy endeavor. The history of currency exchange is the story of humanity's attempt to create a universal language of value.

The Era of "Real" Money

For thousands of years, money wasn't paper; it was commodity. The Greeks traded in silver drachmas, the Romans in gold aurei. Exchange rates were simple math: you weighed the gold in one coin against the gold in another.

The Gold Standard (1875 - 1914)

As international trade exploded in the 19th century, countries needed stability. They adopted the Gold Standard. Every currency was fixed to a specific weight of gold.

For example, if 1 ounce of gold was worth £4 in Britain and $20 in the US, the exchange rate was fixed at £1 = $5. This created an era of stable prices but inflexible economies.

1944: The Bretton Woods Agreement

After World War II, the global economy was in ruins. Allied nations met at Bretton Woods, New Hampshire, to design a new system. They pegged all major currencies to the US Dollar, and pegged the Dollar to gold at $35 per ounce.

This made the US Dollar the world's reserve currency—a status it holds to this day.

1971: The Nixon Shock & Floating Rates

By the late 1960s, the US didn't have enough gold to cover all the dollars in circulation. In 1971, President Richard Nixon abruptly ended the direct convertibility of the dollar to gold.

Currencies began to "float." Their value was no longer set by gold, but by supply and demand in the open market. This birth of the modern Forex (Foreign Exchange) market created the volatility we see today.

The Digital Revolution

Today, currency trading is the largest market in the world, with over $6 Trillion traded daily. It is no longer dominated by governments, but by algorithms, banks, and hedge funds making trades in microseconds.