There was no time to weigh the gold, the total was estimated on the fly. It was 1967 and people were frantic. The US Treasury was loading a Starlifter, a massive army transport capable of flying payloads of more than 60,000 pounds. This is what it looks like when the US Government makes the single largest outgoing gold delivery in history.
Several flights were needed to complete the transfer. Each plane carried $100 million worth of gold. Every flight landed at a Royal Air Force base in the UK. The final destination was The Bank of England. “Panic reigns in the gold market,” wrote one Treasury official.
The delivery of gold to the UK was a response to surging gold purchases following a devaluation of the British pound. The Bank of England was unable to satiate the mounting demand. People were losing faith in England’s currency. Other economies, like Japan, began to show signs of weakening support. Gold purchases increased further boosting prices even more. In his recent book One Nation Under Gold, James Ledbetter explains “the volume of gold traded nearly quadrupled.” What happened next? “That was when The Bank of England told the US Treasury that it could no longer back up the markets daily transactions.” Eventually, the US decoupled gold and the dollar.
The dollar became the “mechanism of exchange.” Today, this is hardly shocking or even interesting. However, at the time, amid such uncertainty, Americans were ushering in a new era where the economy changed nearly overnight. This was something different. Ledbetter astutely remarks that while FDR did take the U.S. off the gold standard earlier in the 1930s, there was still a mandatory stock of gold supporting the dollar. This practice was not an abstraction. There was a vault. There was a key. Suddenly, this wasn’t the case.
Meanwhile, for a period, Americans were restricted by law from owning gold. This limitation only added to the already pervasive sense of unease. How does one protect their assets from the inherent problems with a paper currency backed only by confidence? Many turned to pre-1966 silver coins. They hoped the rising value of the metal would buoy their assets against another crisis.
Not until 1974 would Ford permit Americans to own gold. However, the market has taken an interesting turn since those days. Today’s investors have exposure to numerous methods for owning gold that, somewhat ironically, are reminiscent of the anxieties of an earlier time. Products like gold ETFs make ownership easy but put no real metal in the investor’s hands. What’s more, investors of these instruments have no claim to the physical asset. Starting to sound familiar?
Too often these kinds of investments only serve to make the individual feel like they own gold when in fact their owning paper and sometimes not even that. Too many embrace these modern solutions while forgetting their resemblance to an era when people had no real cover for their assets. Fortunately, the savvy gold enthusiast still has places to go to own the real thing.