Mint Parity

Mint Parity 

(1) Precious metal content of coinage established by law.

(2) The ratio between various countries’ currencies, as determined by the legally established content of pure gold (or silver) in their coinage. When gold or silver monometallism prevailed, the mint parity for countries with the same monetary standard was determined by the ratio of the gold (or silver) content of their monetary units. For example, before World War I the American dollar contained 1.50463 g of pure gold, and the English pound sterling 7.322382 g; thus the mint parity of the pound to the dollar was 4.86656. For countries with different monetary systems, mint parity corresponded to market values of gold and silver.

Where fully valued coins circulated and bank notes were exchangeable for gold, mint parity was the basis of foreign exchange rates. Such rates of exchange fluctuated around mint parity as a reflection of supply and demand for the currency of a given country, within trading limits set by the gold points. When nonexchangeable bank notes began to circulate, the concept of mint parity lost virtually all importance.