The Gold Pool tried to make $35 feel permanent
Under the postwar monetary system, the dollar was tied to gold at $35 an ounce, and foreign governments could exchange dollars for gold from the United States. That promise made the fixed price more than a market target: it was part of the system’s foundation.
But private buyers could still seek gold in London. When demand rose, the market price threatened to climb above the official rate. The Gold Pool’s central banks countered by selling gold into that market, adding supply to restrain the price. The arrangement depended on a crucial condition: that the banks had both the gold and the willingness to keep supplying it.
Selling gold could not solve the pressure underneath
As inflation and uncertainty made gold more attractive, investors sought to exchange dollars for a tangible store of value. At the same time, the United States faced growing demands on its finances. More dollars circulating abroad meant more potential claims on American gold, while the country’s reserve was finite.
The pool’s intervention could temporarily satisfy buyers, but it could not erase doubts about whether the $35 promise was sustainable. Each sale used up some of the collective reserve without removing the reasons people wanted gold. Defending the price therefore became a contest between central banks’ supply and private demand—and the banks could not simply create more gold to match it.
A fixed official price, a changing market
When the pool broke down in 1968, the response was not an immediate end to every official gold price. Instead, the system split: monetary authorities continued to transact at the official rate, while the private market was allowed to find its own price. That arrangement acknowledged what the intervention had shown: governments could set a price for dealings among themselves, but they could not reliably force the broader market to believe it.
