The gold standard: why it ended, and how much gold there is

A century on gold, half a century off

Under a gold standard, money is a promise to pay a fixed weight of gold. The United States had been on a de facto gold standard since the 1830s and made it law in 1900: a dollar was worth a fixed amount of gold, $20.67 an ounce. Much of the world ran on similar rules until the First World War, which, as the Bank of Canada puts it, “marked the end of the classical age of the gold standard.”

The dollar's link was cut in steps. On April 20, 1933 the US suspended the gold standard and stopped converting currency into gold coins; on January 31, 1934 it fixed the price again, at $35. After the Bretton Woods conference of July 1944, other currencies were tied to the dollar and the dollar to gold at $35, a promise kept for foreign governments. On August 15, 1971 the US closed that “gold window.” Two devaluations followed ($38 in 1972, $42.22 in 1973), and by March 1973 the major currencies floated. Since then the official price is only the number the Treasury books its gold at.

Prices on gold: flat over decades, bumpy year to year

The gold standard's best-known promise is stable prices, and over long stretches it roughly kept it: from 1872 to 1913 the US price level changed by −21% in total, −0.6% a year. Year to year it was another story. Inflation swung from −14.0% (1878) to +18.6% (1879); prices fell in 22 of 42 years, and the economy spent 50% of those months in recession, by the NBER's dates.

Since 1972, with no gold link, it is the mirror image: prices rose in every one of the 54 years, ×7.9 in total or 3.9% a year, but the swings are smaller (a standard deviation of 2.9 points against 6.8) and recessions took 11% of the months. The $35 years in between (1934–1971) sat closer to the modern pattern: swings of 3.7 points, 16% of months in recession. Each dot below is one year.

Why the bumps? On gold, the amount of money followed the amount of gold rather than the economy's needs, and interest rates tended to move with the price level rather than with inflation, the puzzle known as Gibson's paradox, which we measure in our article on economic paradoxes. The strips show what happened in each era, not that gold alone caused it: the economy and its banks were very different then.

The official US consumer price index is younger than this series: Shiller's data reach back to 1871 with older price indexes, so the early years are rougher estimates and may swing more than a modern CPI would.

Why the gold standard ended

There was no single reason, but three show up in the numbers: gold grew more slowly than the economies it was meant to anchor; in the 1930s countries that left gold recovered from the moment they left; and by the 1960s far more dollars were held abroad than the US had gold to pay them with.

Not enough new gold

Count the world's mined gold back from USGS's total and its yearly mine output: from 1900 to 1970 the stock grew 1.7% a year (×3.3), while world output grew 2.7% a year (×6.3, Maddison Project). From 1970 to 2022: 1.6% a year against 3.5%. Money tied to gold must either let prices fall as the economy outgrows the metal, or raise the price of gold now and then, as the US did in 1934, 1972 and 1973.

The 1930s: leaving gold and recovering

Britain suspended the gold standard on September 21, 1931; the US on April 20, 1933, before fixing a new price of $35 the next January. The Federal Reserve's history site calls the study by Barry Eichengreen and Jeffrey Sachs (1985) perhaps the most persuasive on the question: recovery in the US and most leading industrial nations “began at the time they suspended the gold standard and reflated their economies.”

The mechanism is simple to state: a country on gold had to defend its gold reserve, with higher interest rates and less money and credit if gold flowed out, even in a slump. A country that left could let its money supply and prices recover.

The 1960s: more dollars abroad than gold at home

Under Bretton Woods, foreign governments could turn their dollars into US gold at $35 an ounce. That worked while the US had gold to spare: at the end of 1957 the US gold stock was $22.9 billion and the dollars held by foreigners $15.8 billion. By 1960 the dollars abroad exceeded the gold; by 1964 the claims of foreign governments and central banks alone did.

The market noticed. On October 20, 1960 a run in London sent gold to $40 an ounce; the London Gold Pool, formed on November 1, 1961, held the price at $35 until it collapsed in March 1968. By the end of 1971 the US had $10.2 billion of gold left, 55% less than in 1957 (some 11,240 tonnes had gone), against $67.8 billion of dollars held abroad, $50.7 billion of it by foreign official institutions.

On August 15, 1971 the US stopped paying out gold. In the words of the Federal Reserve's history of that day, “Eventually, there were more foreign-held dollars than the United States had gold.” The chart shows how much more: at the end of 1971, 6.6 dollars abroad for every dollar of gold, and 5.0 for every dollar of gold in official hands alone.

How much gold is there?

In January 2006 the U.S. Geological Survey estimated that 152,000 tonnes of gold had been mined in all of history. Add USGS's count of each year's mine output since (58,790 t) and the total comes to about 210,800 tonnes. Gold is heavy, 19.32 grams per cubic centimeter, so that is only about 10,910 cubic meters: a cube 22.2 m on a side.

Next to the Statue of Liberty (46.05 m from the top of its base to the torch, 92.99 m from the ground), the cube would reach 48% of the statue's own height. The US Treasury's gold makes a 7.5 m cube; one year of mining (3,300 t in 2025 (est.)), a 5.5 m cube.

In the same 2006 estimate USGS thought about 15% of all gold ever mined had been lost or used up in industry, and that central banks held about 33,000 tonnes. The US Treasury owns 261.5 million troy ounces (8,134 t), the same amount as in 2012, when the Treasury's monthly data begin. It carries them at the statutory $42.22 an ounce; at October 2026's average market price they would be worth $1.07T.

How much gold is mined each year

In 2025 (est.) the world's mines produced about 3,300 tonnes of gold, 8.5 times as much as in 1900 (386 t) and 1.6% of all gold ever mined. The record so far: 3,310 t in 2018.

Most gold is young: 58% of all the gold ever mined came out of the ground after the US closed the gold window in 1971, and half of it has been mined since 1985. Most of the world's gold, in other words, was dug up after it stopped anchoring money.