A surprisingly large number of people still believe that the paper money in their wallet is backed by gold locked in a government vault. It is not. All modern currencies are "Fiat"—meaning they have value strictly because the government says they do. So what happened to the Gold Standard?
The Bretton Woods System (1944)
Near the end of World War II, the global powers met to establish a new financial system. They agreed that the US Dollar would be the world's reserve currency. To establish trust, the US government promised that the US Dollar would be strictly pegged to physical gold at $35 per ounce.
Any foreign central bank could hand the US a $35 bill, and the US was legally obligated to hand them 1 ounce of gold from Fort Knox.
The Printing Problem
In the 1960s, the US government began spending massive amounts of money on the Vietnam War and social programs. They paid for this by printing billions of new US Dollars.
Other countries (especially France) realized the US was printing more paper dollars than they had gold in the vault to back them. Panicking, France and other nations started sending boatloads of paper dollars to New York, aggressively demanding their physical gold before the vault ran empty.
The Nixon Shock (1971)
As the US gold reserves bled dry, President Richard Nixon went on television on August 15, 1971, and "temporarily suspended" the convertibility of the dollar into gold.
That temporary suspension became permanent. The link between money and physical gold was severed forever. Since that day, global governments have had the power to print an infinite amount of paper money, which is why the price of gold has soared from $35 an ounce in 1971 to thousands of dollars an ounce today. It isn't that gold became more valuable; it's that the unbacked paper money lost its purchasing power.