History of the Gold Standard
The gold standard was a monetary system in which a currency's value was tied to a fixed amount of gold. The United States moved through several versions of it: a classical gold standard in the late 1800s and early 1900s, a sharp break in 1933 and 1934 when private gold ownership was restricted and the gold price was raised to $35, and the Bretton Woods era, which ended when the U.S. stopped converting dollars into gold for foreign governments in August 1971.
Before the Gold Standard: Bimetallism
Early U.S. money was bimetallic. The Coinage Act of 1792 defined the dollar in both silver and gold at a fixed ratio. Because market prices of the two metals drifted away from the legal ratio, one metal tended to disappear from circulation while the other remained, a recurring problem through the 1800s. The Coinage Act of 1873 ended the free coinage of silver dollars, moving the country toward gold, and the Gold Standard Act of 1900 formally made gold the sole standard for redeeming paper currency. Our page on silver price history covers silver's side of this story.
The Classical Gold Standard
From the late 1800s until World War I, many major economies, led by Britain, tied their currencies to gold. Exchange rates were effectively fixed, and countries settled trade imbalances in gold. The system brought long-run price stability in some respects, but it also tied money supplies to gold discoveries and could transmit downturns from country to country. World War I disrupted it, and the attempt to restore it in the 1920s was short-lived. Britain left gold again in 1931.
1933 and 1934: The Great Break
Executive Order 6102
During the banking crisis of the Great Depression, President Franklin Roosevelt issued Executive Order 6102 in April 1933. It required people to deliver most gold coin, gold bullion, and gold certificates to the Federal Reserve, with limited exceptions such as small amounts, gold used in industry or the arts, and rare coins held by collectors. The aim was to stop gold hoarding and give the government more control over the money supply.
The Gold Reserve Act
The Gold Reserve Act of January 1934 transferred the Federal Reserve's gold to the U.S. Treasury and allowed the president to set a new gold value for the dollar. The official price rose from $20.67 to $35 per ounce, devaluing the dollar against gold. The Federal Reserve History essay on the Gold Reserve Act explains how this gave the Treasury, rather than the Fed, primary control over gold and supported monetary expansion during the Depression.
Americans were generally not allowed to own gold bullion again until a law change took effect at the end of 1974.
Bretton Woods: Gold Behind the Dollar
In July 1944, representatives of 44 Allied nations met at Bretton Woods, New Hampshire, to design the postwar monetary system. The agreement, described in the Federal Reserve History essay on Bretton Woods, created the International Monetary Fund and the World Bank. Other currencies were pegged to the dollar, and the United States agreed to convert dollars held by foreign governments and central banks into gold at $35 per ounce. Ordinary citizens could not redeem dollars for gold.
The system depended on confidence that the U.S. had enough gold to back the dollars held abroad. As those dollar holdings grew through the 1950s and 1960s, that confidence weakened. Economist Robert Triffin had warned of this tension. A group of central banks formed the London Gold Pool in 1961 to hold the market price near $35, but it collapsed in 1968, leaving a two-tier market with an official price for governments and a free market price for everyone else.
August 1971: The End of Convertibility
On August 15, 1971, President Richard Nixon announced that the United States would suspend the dollar's convertibility into gold, along with wage and price controls and an import surcharge. The Federal Reserve History essay on this event describes it as the effective end of Bretton Woods. After brief attempts to set new fixed rates, major currencies moved to floating exchange rates by 1973. The dollar has had no formal link to gold since then.
The market price of gold, freed from the official peg, rose through the 1970s amid high inflation, as told in our gold price history.
Gold's Role Today
No major economy uses a gold standard now. Money is fiat currency, with value based on law and confidence in the issuing government and its central bank. Gold nonetheless remains an important reserve asset; the U.S. holds the world's largest official reserve, and many central banks have been adding to theirs, as covered in why central banks hold gold. Some people hold gold today as a potential hedge against currency debasement, a concern explored in a short history of currency debasement and gold and the U.S. dollar.
Private ownership is now unrestricted, and the U.S. Mint has produced the American Gold Eagle bullion coin since 1986. If you're curious how individuals buy such coins today, our guide to gold coins available through Goldco shows what one precious metals company lists.
Frequently Asked Questions
Did the U.S. government confiscate gold in 1933?
Executive Order 6102 required most privately held gold coin, bullion, and certificates to be delivered to the Federal Reserve in exchange for paper currency, with limited exceptions. It was a mandatory surrender at the official price.
When did the U.S. leave the gold standard?
Domestic convertibility ended in 1933–1934. International convertibility for foreign governments ended in August 1971.
Why did Bretton Woods end?
Dollars held abroad grew far larger than U.S. gold reserves could cover at $35 an ounce, undermining confidence that the U.S. could honor conversion.
Could the gold standard return?
This page does not make predictions. Any such change would require major legislation and international coordination, and none is in place.