Money · Gold · International Monetary System
Gold After Bretton Woods
Commodity money, monetary reserves, gold standards, and the geopolitical economy of gold from the end of convertibility to the early twenty-first century.
The Dematerialization Thesis
As Astarita (2006) points out, official dollar-to-gold convertibility continued to exist under the Bretton Woods system at least until 1968. The international monetary system therefore still operated as a form of gold-exchange standard. This raises a problem for theories claiming that money had already become fully “dematerialized”: why did runs into gold emerge from the late 1960s onward, why did the official gold price remain politically important, and why did gold reserves continue to occupy such a central place until the final crisis of Bretton Woods?
From this perspective, the claim that central-bank money had become completely detached from gold can be sustained only by restricting monetary validation to the national sphere and abstracting from the international conditions under which money itself is validated.
Astarita further argues that the dematerialization thesis introduces a false historical break and has difficulty explaining why gold continues to operate as both a reserve asset and a means of hoarding.
Gold, Reserves, and Hoarding
- After nearly three decades of formal inconvertibility, official gold reserves still exceeded 30,000 metric tons, approximately one quarter of all the gold historically extracted.
- Special Drawing Rights never developed into an international fiduciary currency capable of replacing gold as an ultimate reference of value.
- In 1994, gold represented 61.6% of official reserves in the United States, 55.4% in France, 30.6% in Germany, 44.2% in Italy, 49.5% in Switzerland, 29% in Austria, and 41% in Belgium.
- In 1995, the IMF reaffirmed gold’s monetary role and argued against mobilizing its holdings in ways that could weaken its global financial position, emphasizing the credibility and room for maneuver provided by those reserves.
- When the European Central Bank was created, 15% of its reserves were designated to be held in gold.
- Between September 1999 and March 2005, gold rose from roughly $265 to $425 per ounce without a comparable increase across metals in general and without an equivalent industrial-demand explanation.
- By the mid-1990s, private gold stocks were estimated at roughly 60,000 metric tons in jewelry and another 24,000 tons in bars and coins.
- Gold was traded extensively through specialized bullion banks, which operated their own refining, trading, and price-formation mechanisms.
- Annual trading volumes in physical gold and gold contracts were estimated at more than 300,000 metric tons—over one hundred times annual production and more than twice the estimated global stock.
For Astarita, such movements are difficult to explain if gold is treated simply as an ordinary metal devoid of monetary functions. The crucial point is that the reserve function is itself one of the classical functions of money.
Drawing on Lipietz and Marx, hoarding is understood as one of the moments in which money appears as the embodiment of value and social power. Even if gold no longer functions as an ordinary means of everyday payment, it continues to perform a hoarding and reserve function within the international monetary system.
On this interpretation, gold is not demanded merely as an industrial metal but as a general equivalent and a store of value. Nor must it appear as nationally minted coin: it can function internationally as a direct embodiment of preserved value.
The issue therefore points toward a broader question: what ultimately stands behind the dollar, the euro, or other fiduciary currencies? One recurring justification offered by monetary authorities for holding gold is precisely that it represents an asset that is not simultaneously someone else’s governmental or institutional liability.
Greenspan and Gold as a Monetary Reference
The monetary importance attributed to gold also appears in a number of statements by Alan Greenspan. In a 2017 interview, Greenspan described gold as the world’s principal currency and emphasized that, unlike credit instruments and fiduciary money, it does not depend upon the creditworthiness of a counterparty.
Greenspan associated the high point of the gold standard with the late nineteenth and early twentieth centuries, a period he characterized by strong productivity growth and relatively low inflation. In his interpretation, the subsequent problems of the gold standard did not necessarily prove that the mechanism itself had failed; rather, they reflected major policy errors.
His central example was Britain’s 1925 return to gold at the pre-First World War parity of $4.86 per pound sterling. Greenspan regarded Winston Churchill’s decision as a monumental error because it imposed an exchange-rate parity that no longer corresponded to Britain’s postwar economic conditions and contributed to the severe deflation of the late 1920s.
From this standpoint, the difficulty did not lie in the monetary mechanism in the abstract, but in the attempt to restore prewar exchange-rate parities despite radically different degrees of wartime destruction and economic transformation across countries.
Greenspan had also argued in 1999 that discretionary monetary policy found it difficult to anchor the price level through time in the same manner that, in his view, the gold standard had done during the nineteenth century.
He later stated that, during his own chairmanship of the Federal Reserve, U.S. monetary policy attempted to follow signals resembling those that a gold standard might have generated, even while operating formally within a fiat-money regime.
A Geopolitical Timeline of Gold
The following chronology brings together events, public debates, and statements concerning the economic and geopolitical role of gold after the formal collapse of Bretton Woods, with particular emphasis on developments after 1999.
Nathan Lewis, writing in Forbes, revisited comments by Paul Volcker, who had served as U.S. Under Secretary of the Treasury for International Monetary Affairs from 1969 to 1974. Volcker argued that the absence of an official, rules-based, cooperatively administered international monetary system could hardly be considered a great success in light of the frequency and destructiveness of international financial crises.
Discussions emerged over whether gold could be incorporated into the IMF’s Special Drawing Rights. Meghnad Desai, associated with the Official Monetary and Financial Institutions Forum, argued that some gold content might help stabilize the synthetic reserve instrument.
Texas approved the creation of a state precious-metals depository. The initiative sought to repatriate assets and reduce dependence on out-of-state storage facilities, while simultaneously stimulating political debate about financial autonomy and monetary sovereignty.
Gold fell to its lowest price in roughly five years. Explanations discussed at the time included a reduced demand for inflation protection, lower demand for defensive assets, and developments in Chinese gold demand.
Debate resurfaced over the transparency and auditing of U.S. gold reserves amid expectations of a possible change in the federal funds rate.
Some analysts interpreted gold accumulation by Russia and China as part of a broader BRICS strategy aimed at reducing dependence on the U.S. dollar.
A substantial decline was reported in gold held by foreign institutions at the Federal Reserve Bank of New York, where a significant share of stored bullion belonged to foreign central banks and governments.
Strong demand for physical gold was interpreted as a response to international financial uncertainty. Gold continued to function as a classic defensive asset during periods of financial and geopolitical stress.
Reports described intense physical-gold demand from China and India, accompanied by declining available inventories in certain international trading centers.
Foreign central banks had reportedly withdrawn around 246 metric tons of gold from the New York Federal Reserve since 2014. These repatriations were interpreted as attempts to strengthen direct control over liquid and strategically important reserve assets.
Gold purchases by BRICS countries were portrayed as part of a broader search for greater monetary autonomy from the dollar amid rising geopolitical tensions.
Renewed debate over financial speculation and monetary fragility reinforced the perception of gold as protection against international instability.
RBC Capital Markets analysts linked part of the increase in gold prices to the Federal Reserve’s decision not to raise the federal funds rate, while warning that future rate increases could place downward pressure on the metal.
Gold reached a four-month high as large investors increased positions amid expectations that the Federal Reserve might postpone rate increases.
Chinese geologists reported the discovery of a major underwater gold deposit in the East China Sea following several years of exploration.
Rumors of stock-market declines contributed to increased demand for gold. The World Gold Council also reported that central banks had purchased another 175 metric tons, partly for reserve diversification.
Jim Rogers argued that, in the event of a dollar bubble, he would consider selling dollar positions and moving funds into gold, silver, and other precious metals.
The Bank of Russia increased its gold reserves by roughly 186 metric tons between January and November 2015, exceeding its purchases during all of 2014.
Despite a major preceding decline in prices, several commentators continued to describe gold as a central element of the monetary universe because of its persistent reserve demand.
GoldCore research director Mark O’Byrne discussed the gradual shift of the center of gravity of the gold market toward China and speculation concerning a possible gold-backed yuan.
Business Insider revisited Alan Greenspan’s historical support for the gold standard, including his 1966 argument that abandoning gold had enabled credit expansion to become less constrained by tangible assets.
The Mises Institute reported Greenspan’s claim that U.S. monetary policy under his Federal Reserve chairmanship had attempted to imitate signals that might have been generated under a gold standard.
Nathan Lewis argued in Forbes that although the gold standard formally disappeared in 1971, the gold price continued to function informally as an important monetary reference during several later periods.
Serbia and the Philippines increased official gold reserves, a development interpreted by some observers as part of a wider diversification away from the U.S. dollar.
Chinese savers and investors showed growing interest in gold as protection against yuan depreciation and economic slowdown. China combined its status as a major global producer with exceptionally strong domestic demand.
Nathan Lewis argued that after Paul Volcker abandoned the early-1980s monetarist experiment, gold and other commodities were used flexibly as references for stabilizing the dollar. Lewis connected this interpretation with the 1985 Plaza Accord and the 1987 Louvre Accord.
José Luis Cava discussed gold accumulation by China and Russia in the context of strategies to reduce international dependence on the dollar, debates over central-bank digital currencies, and possible changes in the international monetary architecture.
The BBC reported on the dispute between the Central Bank of Venezuela and the Bank of England over 31 metric tons of Venezuelan gold, then valued at approximately one billion U.S. dollars.
A British court denied Nicolás Maduro’s government access to Venezuelan gold held at the Bank of England amid the political and legal dispute associated with the United Kingdom’s recognition of Juan Guaidó.
Further debate over Peter Schiff’s forecasts regarding gold, the dollar, and cryptocurrencies illustrated the continued use of gold as a benchmark in discussions of monetary stability and safe-haven assets.
TD Securities global strategy head Richard Kelly expressed a favorable view of gold, arguing that the metal remained relatively inexpensive and retained recovery potential.
Dollar weakness and declining bitcoin prices coincided with gold reaching its highest level since January of that year.
Another sharp decline in bitcoin coincided with increased demand for gold as a defensive asset.
Robert Kiyosaki recommended gold as protection against dollar depreciation and ranked it above bitcoin in his defensive preferences because of its greater perceived stability.
JP Morgan strategist Nikolaos Panigirtzoglou argued that bitcoin’s high volatility represented an obstacle to broader institutional adoption and reduced its relative attractiveness compared with traditional gold in institutional portfolios.
Russia announced that it would remove the U.S. dollar from its National Wealth Fund reserves and replace a substantial share of those positions with gold and other currencies in order to reduce exposure to U.S. sanctions.
References
- Astarita, R. (2006). Concepciones sobre el dinero, el rol del oro y cuestiones monetarias. Instituto Argentino para el Desarrollo Económico.
- Barba, G. (December 4, 2015). Compraré oro antes de que estalle la burbuja del dólar: Jim Rogers. Forbes México.
- BBC News Mundo. (July 2, 2020). Oro de Venezuela: tribunal británico niega al gobierno de Maduro acceso al oro depositado en el Banco de Inglaterra por considerar a Guaidó el presidente.
- Becedas, M., & Nieves, V. (June 1, 2021). JP Morgan avisa de que el crash del bitcoin no ha terminado y supone un revés para su adopción institucional. El Economista.
- Business Insider. (July 10, 2016). Alan Greenspan Wants the US to Go Back on the Gold Standard.
- Cava, J. L. (May 6, 2020). ¿Por qué están acumulando cautelosamente oro China y Rusia? Estrategias de Inversión.
- CMI Gold & Silver. (December 19, 2019). The New Alan Greenspan on Gold.
- Greenspan, A. (February 23, 1999). Testimony of Chairman Alan Greenspan. The Federal Reserve’s Semiannual Report on Monetary Policy. U.S. Federal Reserve.
- Lewis, N. (July 10, 2014). Paul Volcker Dreams of a “New Bretton Woods.” But What Would That Look Like? Forbes.
- Lewis, N. (November 16, 2018). The Gold Standard Didn’t Disappear in 1971, It Just Went Underground. Forbes.
- Lewis, N. (August 8, 2019). We Just Tested the Gold Standard — It Still Works. Forbes.
- Mises Institute. (February 21, 2017). Alan Greenspan Admits Ron Paul Was Right About Gold.
- Mora Lleonart, M. (May 30, 2019). Serbia y Filipinas se unen a la tendencia mundial de comprar oro y se alejan más del estándar del dólar. Banco Central de Cuba.
- Palotai, D., & Veres, I. (November 1, 2020). New Golden Age. Building up Gold Reserves. Hungary Central / LBMA.
- Pedraza, J. Á. (July 9, 2019). Los chinos recurren al oro para proteger sus ahorros ante la devaluación del yuan. Oroinformación.
- Pichel, M. (June 18, 2020). Oro de Venezuela: por qué el Banco de Inglaterra retiene 31 toneladas de lingotes del país sudamericano. BBC News Mundo.
- RT en Español. Multiple articles published between 2015 and 2021 on gold reserves, central banks, BRICS, Russia, China, bitcoin, and international financial markets, as listed in the original bibliography.
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