London Gold Pool

London Gold Pool

Summary of London Gold Pool

An arrangement among certain European central banks and the Federal Reserve Bank of New York designed to maintain stability in the market price of gold in private transactions. The United States had been committed to buy and sell gold in official transactions at thirty-five dollars per ounce; a private market in gold arose in London during 1954, and the price of gold in this market rose significantly over the official price. In response, the New York Federal Reserve Bank, the Bank of England, and certain European central banks formed the Gold Pool in the fall of 1961; the pool was committed to selling gold as required to offset market forces, thereby maintaining a close relationship between the official and market prices. Various economic and political pressures, partly attributable to U.S. involvement in Vietnam, continued upward pressure in the gold market, thereby draining official gold reserves. In March 1968 President Lyndon Johnson announced termination of U.S. participation in the London Gold Pool, effectively terminating official intervention in the private gold market. Gold continued to be available to foreign central banks and treasuries at the official price after the end of the gold pool. Official conversion of gold was ended by President Richard Nixon on August 15, 1971.

(Main Author: William J. Miller)


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