In the European countries,[5] prices in terms of gold, tho fluctuating somewhat, kept at about the same level from 1860 to 1870.

The years 1871 and 1872 were very prosperous and showed rapidly rising prices which reached a maximum in 1873, when a financial panic occurred.
In that very year, just as the gold production for the first time since 1851 had fallen below $100,000,000, several notable changes in monetary legislation were made which made gold more important in the circulation of a number of countries.
In 1873 Germany made gold the standard throughout the new German Empire (having prepared the way by legislation in 1871 which made gold a legal tender alongside of silver), and provided that silver was thenceforth to be used only in the subsidiary coinage.

The same year Belgium, and the next year the other countries of the Latin Union (France, Switzerland, and Italy) took steps which resulted in demonetizing silver; that is, in limiting its coinage to governmental account, and in making gold their one standard money.
The United States at that time had neither gold nor silver regularly in circulation (except in California), and there was a long-continued discussion of "a return to specie payments," which meant the return to a metallic standard, and the redemption of greenbacks on demand.
Meantime in 1873 a law was passed making the gold dollar "the unit of value," and dropping out the standard silver dollar from the list of coins authorized to be issued at the mint.[6] From 1873 until 1879, prices (in greenbacks) were falling in this country very rapidly because the country with the increase in population, wealth, and business, was "growing up to" its unchanging currency supply.

For a like reason at the same time gold prices throughout the world were falling.

While this country was lowering its level of prices from an inflated paper money to a gold commodity basis, the gold basis itself was sinking to a lower level.