1960s — The Gold Drain

How the U.S. lost half its gold reserves in a decade, leading to the collapse of Bretton Woods.

“Was the 1971 depeg really a surprise?”

O1: draining supply at artificially set price is not sustainable

The Gold Drain

U.S. Gold Reserves Decline

Metric tons held by the U.S. Treasury, 1960–1971

Context

After World War II the United States held roughly 20,000 metric tons of gold — over two-thirds of the world's monetary gold. The Bretton Woods system pegged the dollar at $35 per ounce, and foreign central banks could redeem dollars for gold on demand.

Through the 1950s and 1960s, persistent U.S. trade deficits and overseas military spending flooded the world with dollars. Foreign governments, led by France, began converting those dollars into gold. By 1965 U.S. reserves had fallen below 400 million troy ounces — a loss of nearly 40% from the 1945 peak.

The London Gold Pool (1961–1968) was a last-ditch effort by eight central banks to defend the $35 peg on the open market. It collapsed in March 1968 when speculative demand overwhelmed official selling. Three years later, on August 15, 1971, Nixon suspended dollar-gold convertibility entirely.

U.S. Gold Reserves

Loading gold reserves data…

Key Takeaways

  • Peak holdings of ~20,000 metric tons in the early 1940s fell to ~8,100 by 1970 — a 60% decline.
  • The fixed $35/oz price masked the true cost: in 2026 dollars, the lost gold would be worth hundreds of billions.
  • Once the gold window closed, the dollar became a pure fiat currency and gold repriced dramatically upward.
  • The 1960s gold drain is a textbook example of how fixed-rate regimes collapse under persistent imbalances.