by Stuart Englert, Mises Institute:
Gold enthusiasts can celebrate a golden anniversary on New Year’s Eve and simultaneously mark a market manipulation milestone. Fifty years ago, President Gerald R. Ford legalized private gold ownership, allowing Americans once again to stack the regal metal as a wealth-preserving asset and safe haven against monetary inflation and dollar depreciation. Gold futures trading and market meddling also began in the United States a half-century ago.
On December 31, 1974, Ford issued an executive order revoking President Franklin D. Roosevelt’s 1933 decree that criminalized gold hoarding and prohibited American citizens from owning more than $100 worth (about 5 troy ounces at the time) of the demonetized metal. President Ford signed the order without celebratory remarks or public fanfare. He simply released an official statement citing the legal authority he had to take the action.
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While no confetti flew or champagne corks popped in the White House to mark the momentous occasion, repeal of FDR’s 41-year-old edict sparked the largely dormant gold industry and restored trading of the yellow metal as a commodity. Gold could be owned, bought, and sold domestically as an investment without risking a $10,000 fine and 10 years in prison. However, gold coins weren’t US legal tender at the time and bullion wasn’t used in official foreign exchange after President Richard Nixon delinked the dollar from gold in 1971.
As the nation’s only unelected president and vice president, Ford didn’t have a political or public mandate to legalize gold, nor was he a fervent goldbug or hard-money proponent. “Mr. Nice Guy,” as the nation’s 38th president came to be known, merely went along with a bipartisan measure passed by Congress four months earlier. The no-name bill—Public Law 93-373—permitted “United States citizens to purchase, hold, sell, or otherwise deal with gold in the United States or abroad.”
Introduced by Sen. James Fulbright (D-Ark.), the legislation was approved by a coalition of Democrats and Republicans following a grassroots movement led by James U. Blanchard III, founder of the National Committee to Legalize Gold. The measure’s passage was attributed to support from free-market gold advocates and its link to a foreign aid package promoted by Nixon. Ford signed the bill into law on August 14, 1974, six days after the partial-term Republican took the presidential oath following Nixon’s resignation over the Watergate scandal.
Gold legalization wasn’t without its concerns and opposition. The decision raised alarms within the US Treasury Department and Federal Reserve, particularly after the gold price climbed to a record high, topping $195 an ounce on December 30, 1974. At the time, the statutory gold price was $44.22 an ounce and the nation’s gold stocks were undergoing a highly-publicized audit that began with a congressional, media-covered, and question-raising inspection of a single vault at Fort Knox (KY) Bullion Depository on September 23, 1974.
US Treasury & IMF Sold Gold to Cap Price
Treasury officials worried strong public demand for gold might drive prices higher, increase the nation’s trade deficit if the commodity were imported and further weaken the unbacked, devalued, and expanding supply of Federal Reserve notes. Those were valid concerns amid the inflationary spiral triggered by Nixon’s suspension of the international gold standard, the lingering effects of the 1973 Arab oil embargo, and persistent federal budget deficits and rising national debt.
