Nixon's televised announcement closed the gold window and ended Bretton Woods. The repricing that followed reshaped global finance for the next half-century.
Contents4 sections
On a Sunday evening in mid-August 1971, Richard Nixon interrupted Bonanza to tell American viewers that the United States was suspending the dollar's convertibility into gold. The decision was framed as temporary. It became permanent within two years and remade the international monetary system.
Why the window closed
Under Bretton Woods, foreign central banks could redeem dollars for gold at $35 per ounce. By 1971 the United States had run persistent balance-of-payments deficits, and foreign holdings of dollars far exceeded the actual gold backing. France under de Gaulle had been redeeming aggressively. The math no longer worked, and a run on US gold was accelerating.
- 1944: Bretton Woods establishes $35/oz peg
- 1965: De Gaulle begins large redemptions
- 1968: London Gold Pool collapses, two-tier price emerges
- August 15, 1971: Nixon shock
- 1973: Smithsonian Agreement fails, full float begins
The economic consequences
Within nine years gold went from $35 to $850. The dollar lost roughly half its trade-weighted value. Inflation in the United States, suppressed under Bretton Woods discipline, ran above 13% by 1979. The fiat era began in earnest, and central banks worldwide had to invent new frameworks for monetary policy.
"My fellow Americans, I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold." β Richard Nixon, August 15, 1971
Why it still matters
Every macro framework taught today implicitly assumes the post-1971 system. Floating exchange rates, central bank inflation targets, and the dollar's role as global reserve currency all date from this rupture. Anyone arguing for a "new Bretton Woods" or a gold-anchored system is implicitly arguing to undo this decision.
The unresolved question
Nixon's framing β "temporary" β was technically never reversed. There has never been a formal congressional act re-establishing gold convertibility or formally abandoning it. The gold reserve at Fort Knox is still on the Treasury's books at $42.22 per ounce, the statutory price set in 1973.
Bottom line: The Nixon shock was not just a policy decision. It was the start of the system we still live in, and gold's modern bull market is in many ways a half-century-long response to it.
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