Traditionally, the flag may be decorated with golden fringe surrounding the perimeter of the flag as long as it does not deface the flag proper. Ceremonial displays of the flag, such as those in parades or on indoor posts, often use fringe to enhance the appearance of the flag. Traditionally, the Army and Air Force use a fringed flag for parade, color guard and indoor display, while the Navy, Marine Corps and Coast Guard use a fringeless flag for all occasions.
While the most probable theory regarding the gold fringe is that it originated in the U.S. Army, another theory is that it’s used to designate Admiralty courts. An admiralty court is a court system that operates under martial law.