The United States
Gold Reserve Act of January 30, 1934 required that all
goldGold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and
gold certificateA gold certificate in general is a certificate of ownership that gold owners hold instead of storing the actual gold. It has both a historic meaning as a US paper currency and a current meaning as a way to invest in gold....
s held by the Federal Reserve be surrendered and vested in the sole title of the
United States Department of the TreasuryThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
.
The United States
Gold Reserve Act of January 30, 1934 required that all
goldGold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and
gold certificateA gold certificate in general is a certificate of ownership that gold owners hold instead of storing the actual gold. It has both a historic meaning as a US paper currency and a current meaning as a way to invest in gold....
s held by the Federal Reserve be surrendered and vested in the sole title of the
United States Department of the TreasuryThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
.
The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in
United States Bullion DepositoryThe United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government.The...
at Fort Knox and other locations. The act also changed the nominal price of gold from $20.67 per
troy ounceThe troy ounce is a unit of imperial measure. In the present day it is most commonly used to gauge the weight of precious metals. One troy ounce is nowadays defined as exactly 0.0311034768 kg = 31.1034768 g. There are approximately 32.1507466 troy oz in 1 kg...
to $35.
A year earlier, in 1933,
Executive Order 6102Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"...
had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins. These prohibitions were relaxed starting in 1964 – gold certificates were again allowed for private investors on April 24, 1964, although the obligation to pay the certificate holder on demand in gold specie would not be honored. By 1975 Americans could again freely own and trade gold.
The Gold Reserve Act authorized the
Exchange Stabilization FundThe Exchange Stabilization Fund is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention...
to use such assets as were not needed for exchange market stabilization to deal in government securities.
The Gold Reserve Act had economic ramifications far beyond national finance. At that time many
contractA contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
s stipulated that their monetary terms could be demanded in gold. Such
gold clauseGold clauses specified within business contracts allow the creditor the option to receive payment in gold or gold equivalent. A gold clause may prove valuable to the creditor in long term contracts, wherein questions may arise as to whether a currency in use at the time the contract was entered...
s were intended to protect against the United States devaluing the dollar. When the
Emergency Banking ActThe Emergency Banking Act was an act of the United States Congress spearheaded by President Franklin D. Roosevelt during the Great Depression. It was passed on March 9, 1933...
of 1933 and the Gold Reserve Act of 1934 outlawed the use of gold such contracts became sources of controversy. In the
gold clause caseThe Gold Clause Cases were a series of actions brought before the Supreme Court of the United States, in which the court narrowly upheld restrictions on the ownership of gold implemented by the administration of U.S. President Franklin D. Roosevelt in order to fight the Great Depression. The cases...
Norman vs. Baltimore & Ohio Railroad Co., 294 U.S. 240 (1935), the U.S. Supreme Court ruled that gold clauses were invalid. However, Congress later reinstated the option to use gold clauses for obligations (new contracts) issued after October 1977 in accordance with (d)(2).
The 2008 decision
216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co. established that gold clause in contracts signed before 1933 was only suspended not erased, and under certain limited circumstances might be reactivated.