The phrase refers to a historical monetary context where the value of currency, specifically 100 pence (equivalent to one pound sterling in the United Kingdom), was theoretically linked to a fixed amount of gold, as per a standard potentially in effect around 1992. This implies a system where the paper currency could, in principle, be exchanged for a specified weight of gold. For example, if the gold standard was active and a pound sterling was backed by a set amount of gold, then 100 pence, as a component of that pound, also represented a fraction of that gold reserve.
Such a monetary system aimed to provide stability and confidence in the currency. The theoretical link to a tangible asset like gold was intended to limit inflation and maintain the value of the currency over time. Historically, adherence to a gold standard provided a sense of discipline to government monetary policy, as the amount of currency in circulation was constrained by the gold reserves held. This system was believed to foster international trade and investment due to the relative predictability of exchange rates.
