Gold Reserve Act Nationalizes Gold Holdings and Devalues Dollar Over Wall Street Opposition

President Roosevelt signs the Gold Reserve Act on January 30, 1934, nationalizing all gold holdings in the United States, transferring ownership of Federal Reserve gold to the U.S. Treasury, and authorizing the President to set the gold value of the dollar between 50 and 60 percent of its previous level. The next day, Roosevelt fixes the gold price at $35 per ounce, effectively devaluing the dollar by 41 percent—the most dramatic monetary intervention in American history and one fiercely opposed by Wall Street and conservative financial interests.

The gold program aims to raise prices and reflate the depression-stricken economy by increasing the dollar supply relative to gold. All gold coin, gold bullion, and gold certificates must be surrendered to the Treasury in exchange for currency at the old price of $20.67 per ounce; the government then immediately profits from the revaluation, using the “windfall” to create a $2 billion Exchange Stabilization Fund. Critics, including former Democratic presidential candidates Al Smith and John W. Davis, denounce the gold policy as confiscation of private property and monetary manipulation that will destroy confidence in the dollar. Wall Street bankers warn of catastrophic inflation and economic collapse.

The gold program represents Roosevelt’s most direct assault on the financial establishment’s traditional control over monetary policy. Sound-money conservatives in both parties, allied with banking interests, view gold standard abandonment as dangerous radicalism threatening the stability of capitalism itself. The American Liberty League, formed later in 1934, lists the gold program among Roosevelt’s most offensive policies. However, the predicted catastrophe fails to materialize: prices rise modestly, the economy begins to recover, and the dollar remains stable in international markets. The Gold Reserve Act establishes federal supremacy over monetary policy and demonstrates that government intervention in financial markets can achieve public purposes over the objections of financial elites—a lesson periodically forgotten and relearned through subsequent financial crises.