The phrase refers to a historic financial context the place the worth of forex, particularly 100 pence (equal to at least one pound sterling in the UK), was theoretically linked to a hard and fast quantity of gold, as per a regular probably in impact round 1992. This suggests a system the place the paper forex may, in precept, be exchanged for a specified weight of gold. For instance, if the gold customary was lively and a pound sterling was backed by a set quantity of gold, then 100 pence, as a element of that pound, additionally represented a fraction of that gold reserve.
Such a financial system aimed to supply stability and confidence within the forex. The theoretical hyperlink to a tangible asset like gold was supposed to restrict inflation and preserve the worth of the forex over time. Traditionally, adherence to a gold customary offered a way of self-discipline to authorities financial coverage, as the quantity of forex in circulation was constrained by the gold reserves held. This method was believed to foster worldwide commerce and funding as a result of relative predictability of trade charges.
