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The Failure Of The 1960s London Gold Pool


In July 1944, close to the end of World War Two, delegates from 44 allied nations gathered in Bretton Woods, New Hampshire to recreate an international financial system and establish regulations for it. Two entities were founded in this meeting—the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IRBD). After this meeting, the General Agreement on Tariffs and Trade (GATT) was later established.

Gold bars and coins

The IMF was given the responsibility of maintaining a system of international currency exchange rates, which became known as the Bretton Woods system. Exchange rates were to be fixed concerning each other, but the system allowed adjustments as necessary. Further, all currencies in the system were required to be convertible, which meant they could be readily exchanged for physical gold or for other currencies that could be readily exchanged for gold.

The United States dollar was designated as the anchor currency of the Bretton Woods system. For many years, the price of gold was pegged at $35 US per ounce. Thus, the dollar became the world’s reserve currency. Foreign central banks were willing to hold US dollars because, at the time, they were readily convertible into gold upon demand.

However, the Bretton Woods system did not regulate the price of gold as a commodity. Thus, its price might fluctuate due to variations in private industrial and financial demand. If the free market price rose above $35/ounce, central banks had the incentive to redeem US dollars for gold to then sell the gold for a higher price in other markets.

Throughout the 1950s, the US Treasury experienced a continuing drain on its gold holdings. Pressures were gradually mounting for higher gold prices. Late in 1960, when the free market gold price topped $40, the US Federal Reserve and the Bank of England agreed that a significant quantity of gold stored at the Bank of England would be sold to help reduce the demand for US gold reserves.

The result was that in November 1961 eight nations agreed to establish the London Gold Pool for the explicit purpose of defending the price of gold at $35/ounce. A total of 240 tons (7.716 million ounces) were contributed to this Pool. The US allocated 120 tons, half of the total. Germany supplied 27 tons. The United Kingdom, France, and Italy each provided 22 tons. Belgium, the Netherlands, and Switzerland each put in 9 tons. At the time, the value of gold came to $270 million US.

The psychological impact of this “massive horde” of gold committed to holding the price down to $35/ounce did not last long. Inflation of the money supply in the US, partly to fund the Vietnam War, led the US by 1965 to lose a cumulative $3 billion from supporting the London Gold Pool.

In 1967, France publicly withdrew from the London Gold Pool and was aggressively repatriating US dollars to America to obtain physical gold. The Netherlands also ramped up redeeming dollars for gold, though on a smaller scale and with less fanfare than France. When the United Kingdom devalued the pound by 14.3% on Nov. 18, 1967, that further accelerated the run on physical gold reserves in the London Gold Pool.

Late on Thursday, March 14, 1968, the US government asked the British government to close the London gold markets (then the world’s largest gold trading market) the next day as an effort to stem demand for gold. British Queen Elizabeth II petitioned the House of Commons to declare March 15 a bank holiday.

A conference in Washington, DC was quickly arranged and held over that weekend. On Monday, March 18 Congress passed a law repealing the requirement that the US Treasury maintain a gold reserve to back the dollar.

The London gold market remained closed for two more weeks, which proved to be the death knell of the London Gold Pool. During this hiatus, other markets traded gold at ever-higher prices. The largest Swiss banks formed the Zurich Gold Pool to establish that city as a major gold trading center.

The collapse of the London Gold Pool resulted in the official adoption of a two-tiered gold market. While gold was officially still worth $35 per ounce, gold could be purchased at that price only by the few governments that did not trade in the private markets. No private parties could acquire gold at this lower fixed price.

The US government continued to ramp up inflation of the money supply, leading West Germany to withdraw from the Bretton Woods system in May 1971 and Switzerland and France to do so in August 1971. So many US dollars were being repatriated to the US Treasury that gold reserves fell to their lowest levels since 1938. The value of the US dollar was falling even faster against other currencies.

On April 15, 1971, US President Richard Nixon announced that the US government was “temporarily” suspending the convertibility by central banks of US dollars into gold, effectively completing the collapse of the Bretton Woods system. Today, 48 years later, the US government’s “temporary” suspension of redeeming dollars for gold is still in effect.

Minor historical side note: The founder of Liberty Coin Service, R. W. “Bill” Bradford, had been set up at coin shows since in 1968. Upon President Nixon’s announcement of the closing of the gold exchange window in August 1971, Bradford decided that the market was ripe to open a brick-and-mortar store to redeem dollars for gold and vice versa. Forty-eight years later, the business is still in operation, now under its third owner.

Patrick A. Heller was the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman Dealer of the Year Award, and 2008 Presidential Award winner. Over the years, he has also been honored by the Numismatic Literary Guild, Professional Numismatists Guild, Industry Council for Tangible Assets, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and become part of the audio and text archives posted at