Overview:
In 1934, the Gold Reserve Act transferred nearly all privately held gold to the U.S. Treasury, revalued the dollar from $20.67 to $35 an ounce, stripped the Federal Reserve of its gold, and made private gold ownership a federal crime for the next four decades. Its effect on the dollar’s purchasing power outlasted the law itself, which was repealed on December 31, 1974, restoring Americans’ right to own gold.
For forty years, it was a federal crime for an American to own gold. That era began on January 30, 1934, when President Franklin D. Roosevelt signed the Gold Reserve Act and the U.S. Treasury took title to nearly every ounce of monetary gold in the country. It ended on December 31, 1974, when Americans got the right to own gold back.
CMI Gold & Silver was founded in 1973, right as that era was ending, and we have spent every year since helping Americans buy and hold the one asset the government once took off the table. Gold trades at all-time highs today [live spot price]. The story of how it was taken from Americans, and given back, explains a great deal about why.
President Roosevelt Signed the Gold Reserve Act on January 30, 1934
The Act was the final step in a program that began the year before. In April 1933, Executive Order 6102 made it a criminal offense to hoard gold coin, bullion, or certificates and ordered Americans to hand their gold to the Federal Reserve for $20.67 an ounce. The Gold Reserve Act finished the job. It passed the House 373 to 41 and the Senate 69 to 25, and its official title promised “to provide for the better use of the monetary gold stock of the United States.” The better use was moving that gold out of private hands and into the government’s.
The Act Transferred Every Ounce of Monetary Gold to the Treasury
Section 2 transferred ownership of all monetary gold in the country (coins and bullion held by individuals, banks, and the Federal Reserve itself) to the U.S. Treasury, sparing only jewelry and collector coins. Sections 5 and 6 ended the public’s right to redeem paper dollars for gold, reversing a system that had held since the 1800s. From then on, the government converted gold into dollars whether or not the citizen wanted the trade.
Roosevelt was blunt about the logic. There was not enough gold to honor every claim, so the government should, in his words, “in the interest of justice allow none to be paid in gold.”
Roosevelt Revalued Gold From $20.67 to $35 the Next Day
The Act authorized the president to set the gold value of the dollar by proclamation, and Roosevelt did exactly that on January 31, 1934, one day later. He raised the official price of gold from $20.67 to $35 an ounce, cutting the gold value of the dollar to 59 cents of what it had been.
That single stroke created wealth for the Treasury out of nothing. Between January 31 and February 1, 1934, the government’s gold stock jumped by $2.98 billion, and $2.81 billion of that came purely from redefining the dollar, not from mining, not from trade, but from a proclamation. Foreign gold then poured into the United States to capture the higher price, and Treasury holdings tripled over the decade that followed.
The Federal Reserve Lost Its Gold, and Its Independence
The Act stripped the Federal Reserve of its gold and much of its power along with it. From 1934 on, the Fed carried out policies designed largely by the Treasury, and it did not regain real control over monetary policy until the Fed-Treasury Accord of 1951. At the time, the Washington Post compared Roosevelt’s letter reassuring the central bank to a eulogy.
Ninety years later, the arrangement still stands. As the Federal Reserve states plainly today, “The Federal Reserve does not own gold.” The statutory price of Treasury gold has been frozen at $42.22 an ounce since 1973, a number with no relationship to what gold actually trades for.
Was the Gold Reserve Act Effective?
It depends on what you were trying to accomplish. For Roosevelt’s immediate goal, breaking the deflation that was strangling the economy, most economists say it worked. Devaluing the dollar and flooding the system with gold expanded the money supply, and output grew quickly through the rest of the decade. Milton Friedman and Anna Schwartz credited that recovery largely to the gold that arrived after revaluation and the capital fleeing to American shores.
For the American saver, the answer looks very different. The same policy that reflated the economy confiscated citizens’ gold, paid them in a dollar worth 59 cents on its old gold value, and made owning the metal a crime for the next forty years. It handed the Treasury the Exchange Stabilization Fund, a tool to move the dollar’s value without the Fed’s approval, still in use today. And it loosened the discipline gold had imposed on the currency. By one long-run measure, U.S. inflation averaged well under 2% a year before 1934 and closer to 4% in the decades after. Mainstream economists call that flexibility a feature, arguing it gave policymakers room to fight downturns. We see the other side of the ledger: a dollar that has leaked purchasing power, by design, ever since it was cut loose from gold.
When Did the Gold Reserve Act End?
Americans got the right to own gold back on December 31, 1974. President Gerald Ford signed the change into law on August 14, 1974 as a rider to the International Development Association Appropriations Act, and it took effect at the end of that year. Three years earlier, in 1971, the Nixon administration had already severed the dollar’s last remaining link to gold, ending the system for good.
CMI Gold & Silver had been in business for about a year when that door reopened. As a family-owned gold company founded in 1973, you can bet we celebrated. For the first time in four decades, an American could legally walk in, buy a gold coin, and hold it. That freedom is the reason CMI exists, and it is why we mark this date every year.
What the Gold Reserve Act Means for Investors Today
The Act’s fingerprints are still on the system. The Treasury still holds the nation’s gold, the Fed still holds none, and the Exchange Stabilization Fund created in 1934 was used as recently as the 2008 financial crisis. More important for anyone protecting their wealth, the era that began in 1934 and came apart between 1971 and 1974 is the reason the dollar behaves the way it does, a currency no longer anchored to anything you can hold.
Gold sat outside every one of those decisions. It could be confiscated, but it could not be printed, devalued by proclamation, or made worth less by a vote in Congress. That is the quality that has kept it valuable for thousands of years, and it is why it trades at record highs today while the dollar buys less each year.
If this history makes you want to understand where gold fits for you, we can help. You can track daily spot prices for real-time context, explore gold coins and bullion directly, or buy gold and silver through a non-commission broker who is matched to your situation, not a sales quota.
