Volume I · Gold · Money Research

03 — From Metal to Money: Dust, Rings, Bars and Early Coins

Stage one: metal by weight (c. 3000–650 BCE)

Some early documented metallic units of account were silver by weight rather than gold coin. In Sumer and Babylon it was silver, cut from bars and rings and weighed against standard stones in shekels (~8.3 g), minas (60 shekels) and talents (60 minas). Archaeologists call the cut-up silver of the Levant hacksilber. Egypt did the same with copper, silver and gold rings and bars in deben and kite units; tomb paintings show scribes weighing gold rings on balances. Gold was often worth less than silver in early Egypt because Nubia made gold relatively plentiful; in Mesopotamia the ratio was about 1:8 to 1:10 in silver's favour of scarcity.

Forms of gold in circulation at this stage: dust (in quills or bags, still used in West Africa and the Klondike millennia later), nuggets, rings and spirals of standard weight (Egypt, Ireland's Bronze Age "ring money," Scandinavia), small bars and ingots, and cut pieces of larger objects. None of it carried a stamp of authority. Each transaction required a scale and a test for purity — a touchstone (a black slate streak test, attested from the Lydian period; a Greek word for it, basanos, came to mean any severe test) or a fire assay.

Stage two: the invention of the coin (c. 650–550 BCE)

A stamp identified an issuing authority and a denomination, reducing—but not eliminating—the need to weigh and test a piece. This happened in Lydia, in western Anatolia, whose capital Sardis sat on the electrum-bearing Pactolus river. The earliest coins, from about 650–600 BCE (the exact date is debated; the Artemision hoard at Ephesus is the key deposit), are bean-shaped lumps of electrum with a striated punch on one side and, from the reign of Alyattes (c. 610–560 BCE), a lion's head on the other — the royal badge, the first mark of sovereign guarantee on money. Herodotus wrote that the Lydians "were the first people we know of to strike and use coins of gold and silver."

Why electrum first? Because that is what came out of the river. But natural electrum varies in gold content, so its value was uncertain — a coin might be 45% or 75% gold. Some scholars think the Lydian state deliberately alloyed electrum to a fixed and lower gold content than the river metal and profited from the difference, the first seigniorage. Either way, the uncertainty was the problem the next reform solved.

Stage three: Croesus separates gold from silver (c. 550 BCE)

King Croesus (r. c. 561–546 BCE) — the "rich as Croesus" one — refined the electrum into pure gold and pure silver, using the salt-cementation process whose workshops have been excavated at Sardis, and issued the Croeseids: gold staters first at about 10.7 g, then reduced to 8.1 g, and silver staters of 10.7 g with fractions down to 1/48. The reasons for the weight change and the precise legal relationship between the issues require numismatic evidence. Croesus' separate gold and silver issues were an early paired coinage; the asserted exact exchange rate and a direct template for later systems require numismatic verification.

Croesus lost his kingdom to Cyrus of Persia in 546 BCE; Persia kept striking Croeseids until about 515 BCE and then Darius I replaced them with the gold daric (8.4 g, about 95–98% pure, showing the king as archer) and the silver siglos (5.4 g), at 1 daric = 20 sigloi. The daric circulated across the Persian Empire, from the Aegean to the Indus, and was used to pay Greek mercenaries and buy Greek politicians. Persia kept gold coinage as a royal monopoly; satraps could strike silver only.

Stage four: coinage spreads (550–300 BCE)

The idea crossed to the Greek cities within decades, but the Greeks minted mostly silver (Aegina's turtles, Corinth's Pegasus, Athens' owl tetradrachm from the Laurion mines) because that is what they had, and gold coins remained rare emergency issues until Philip II of Macedon captured the Pangaion gold mines and struck gold philippeioi (c. 356 BCE), which Alexander continued as staters and flooded across Asia with the captured Persian treasure. In India, punch-marked silver coins appear around the sixth century BCE and gold coins in quantity with the Kushans (~100 CE). In China, coinage went a different way: cowries, then cast bronze spade and knife money, then the round ban liang of 221 BCE; gold circulated as stamped plates (the Chu ying yuan) and later ingots, but everyday Chinese money would be bronze cash, and later silver and paper, for two thousand years.

What form gold money took after coinage

Once coins existed, gold in circulation took several forms at once and continued to do so until the twentieth century:

Coins of sovereign standard — stater, daric, aureus, solidus, dinar, florin, ducat, mohur, sovereign, eagle, napoléon — each a known weight and fineness, accepted by count.

Bars and ingots for large payments, treasury reserves and international settlement, often by weight and assay; modern central banks also hold bullion ("Good Delivery" bars of ~400 troy ounces).

Dust and nuggets in frontier economies (West Africa, California 1849, the Klondike), where the local unit was the "pinch."

Jewellery as a store of wealth that could be sold or melted, especially in India and the Middle East — economically, gold jewellery is a savings account worn on the body, and this remains true today.

Paper claims on gold — goldsmiths' receipts, banknotes, gold certificates — which from the seventeenth century increasingly did the circulating while the metal sat in a vault.

Was gold "backed" by anything?

A full-bodied coin is itself metal, although the stamp identifies an issuer and does not guarantee purchasing power. Other instruments require their own legal terms. Silver and copper coins could be full-bodied or subsidiary tokens, depending on the place and period; particular notes could be redeemable in a specified metal. A fixed legal ratio is not the same as an individual redemption promise. Physical gold was not an issuer's promise, but not every monetary system placed it at the base. (“Silver, Copper, Bronze and Bimetallism” and “The Gold Standard Era, 1717–1971” develop this.)

Key takeaways

Gold entered circulation first by weight, in rings, bars and dust, alongside and usually below silver. Early electrum coins appeared in western Anatolia around the seventh century BCE, and Croesus later issued separate gold and silver pieces. Their exact mint relationship remains under review. Persian and Hellenistic gold issues circulated across substantial trading areas. From then on gold circulated as coin, bar, dust, jewellery and paper claim, and a full-bodied gold coin was metal rather than a claim on an issuer, while its purchasing power still depended on acceptance and prices.