At the end of October 1960, gold transactions were taking place on the London market at prices of $40 per troy ounce or higher. Officially, however, gold remained at $35. This discrepancy was more than just a conspicuous market movement: it called into question the credibility of the dollar and, consequently, the Bretton Woods monetary system.
The response did not take the form of a new treaty. Eight central banks or monetary authorities created an informal cooperation that later became known as the London Gold Pool. Led by the Bank of England, they bought and sold gold on the London market. Their goal was to keep the private market price close to the official dollar-gold parity.
Short answer: The London Gold Pool was a cooperative effort between the US and seven European central banks that began operating on November 6, 1961. The Bank of England acted as agent, buying and selling gold in London to keep the market price close to the official dollar-gold parity. The interventions ended in March 1968. Afterwards, an official price for monetary authorities and a freely determined private market price existed side by side.
Key statements at a glance
- The sales mechanism began to operate on November 6, 1961; members and quotas were finalized on November 18.
- The original participants were the USA, Great Britain, West Germany, France, Italy, Belgium, the Netherlands and Switzerland.
- The US contributed 50 percent of the agreed quota; the Bank of England carried out the London business.
- The pool didn’t just sell gold. Especially in its early years, it bought considerable quantities and distributed surpluses to its members.
- 35 US dollars was the official price for transactions by the American monetary authorities. In the London market, a narrow range was practically maintained, the upper limit of which was often around 35.20 dollars.
- France suspended further contributions in 1967, but initially did not formally and publicly withdraw from the agreement. Seven members remained active in the final phase.
- The pool was a documented instance of government market intervention. This does not, however, prove that there is ongoing control of the global gold price.
Why was the London Gold Pool founded?
Under Bretton Woods, the exchange rates of major currencies were pegged to the US dollar. The United States, in turn, promised to exchange dollars for gold at a fixed price of $35 per troy ounce to foreign monetary authorities. Private individuals did not have this right.
Alongside this, a private gold market existed. London was its most important center. As long as the London price was only slightly above the official parity, the difference could be explained by commissions, insurance, and transportation costs. A significant price increase, however, signaled that market participants were doubting the fixed dollar-gold exchange rate.
This is precisely what happened in the fall of 1960. Political uncertainty, the American balance of payments deficit, and doubts about future US monetary policy triggered strong demand. According to the Bank of England, gold was trading at or above $40 at the end of October. The Bank of England, with the support of the American monetary authorities, then sold significant quantities of gold to lower the price.
In October 1961, the United States proposed a joint sales agreement. The mechanism began operating on November 6; members and quotas were finalized on November 18. These dates thus mark the operational start and the final establishment of the group. There was no state treaty or rigid set of rules. The Bank of England described the arrangement in 1964 as an experimental “gentlemen’s agreement.”
Which eight central banks were members of the Gold Pool?
The members shared purchases, sales, profits, and losses according to agreed-upon quotas. The USA accounted for half. The largest European shares were held by West Germany, Great Britain, Italy, and France.
| Member | Initial quota | Original share |
|---|---|---|
| United States | 50 % | 135 million US dollars |
| West Germany | 11 % | 30 million US dollars |
| Great Britain | 9 % | 25 million US dollars |
| Italy | 9 % | 25 million US dollars |
| France | 9 % | 25 million US dollars |
| Switzerland | 4 % | 10 million US dollars |
| Netherlands | 4 % | 10 million US dollars |
| Belgium | 4 % | 10 million US dollars |
| In total | 100 % | 270 million US dollars |
The quotas regulated participation in profits and additional charges; they did not refer to a gold reserve always stored separately in London. The Bank for International Settlements provided the framework for discussions in Basel, but was not a ninth member of the pool.
The US guaranteed the official gold parity and bore 50 percent of the pooling costs. Operationally, however, the Bank of England handled the transactions: it placed buy and sell orders, managed the joint accounts, and settled accounts with the participating central banks.
How was the gold price defended?
The gold pool consisted of two mechanisms. The selling syndicate provided gold when exceptional demand drove the London price up. The buying syndicate acquired gold when supply was sufficient; the purchases were then distributed according to agreed rules.
The difference between $35 and approximately $35.20 is important. The $35 represented the official American gold price. For delivery from New York to London, commission, transport, and insurance were added. Above this shipping parity, authorized monetary authorities could obtain gold more cheaply in the US. The pool therefore maintained a narrow London price range, not exactly $35 for every transaction.
The Bank of England did not participate directly in the daily fixing table. It routed its orders through NM Rothschild & Sons, the then-chairman of the London Gold Market. The intervention was thus embedded within the normal market process. Market participants continued to trade with one another; the official side merely joined in as a large buyer or seller.
The pool did not sell gold continuously.
Many simplified accounts portray the London Gold Pool as a permanent sales operation designed to suppress the gold price. Contemporary figures paint a different picture. After the trial run in November 1961, the quantities sold were recovered through purchases by the end of February 1962. According to the Bank of England, the sales consortium didn’t even need to be activated in 1963. Instead, more than $600 million in purchased gold was distributed among the participants.
The Federal Reserve Bulletin of March 1964 also described a buy and a sell agreement. Naef’s series shows negative monthly transactions from September 1964 onward: sales now predominated. Cumulatively, the position built up since 1961 initially remained positive and only reached zero toward the end of 1966.
Why did the system come under increasing pressure?
The interventions cushioned price spikes but did not eliminate the causes of the loss of confidence. Outside the US, dollar holdings grew while American gold reserves declined; inflation, expansionary fiscal policy, and balance of payments problems further weakened parity.
At the same time, the pound came under pressure. This affected the pool: Great Britain operated the central private gold market, and the pound and dollar were important reserve currencies.
The Bank for International Settlements’ 1968 annual report cited the deteriorating payment and reserve situation of Great Britain and the USA, but especially the devaluation of the pound, as the main factors. This puts the crisis into a broader context than the narrative that France alone brought down the pool.
The supply and demand situation also worsened. According to the BIS, new gold inflows in 1967 were the lowest since 1960: Russian sales ceased in the second year, and in the second half of the year, due to South Africa’s balance of payments surplus, less gold reached the market than was mined.
What role did France play in 1967?
France openly criticized the dollar-based monetary system. President Charles de Gaulle called for a stronger role for gold; the country had also converted dollar reserves into American gold. This later led to the simplified narrative that France brought down the gold pool in 1967.
The facts are more nuanced. When the pool funds were to be increased again in June 1967, the Banque de France rejected further losses or allocations. Its existing participation remained in place. An internal memo recommended not a formal and public withdrawal, but rather a suspension of further participation.
In November 1967, France’s stance became public, exacerbating the uncertainty. However, the pool did not suddenly shrink by nine percent. France’s share amounted to $33.3 million – nine percent of the $370 million limit up to which it had contributed additional tranches. When the gold syndicate later reached $1.37 billion, this represented only about 2.4 percent. The stake remained. In its final phase, seven active members operated: Belgium, Italy, the Netherlands, Switzerland, Great Britain, the USA, and West Germany.
Archival research therefore assesses France’s direct contribution to the collapse as limited. Its stance weakened the signal of unity and fueled speculation. However, the selling pressure arose primarily from the system’s structural problems, the pound crisis, and the flight to gold.
How did the London Gold Pool collapse in March 1968?
Following the devaluation of the pound on November 18, 1967, gold demand surged. The Bank of England’s Quarterly Bulletin reported sales by pool members up to the Washington Conference at more than three billion dollars. However, Naef’s series of net Bank of England market operations—predominantly pool transactions—calculated from dealer reports, shows losses of more than 1.238 billion dollars, or approximately 1,100 tons of gold, for these months. Thus, one source cites gross sales by all members, while the other presents the balance of London purchases and sales using a different definition. The discrepancy does not indicate a nearly two billion dollar repurchase by the pool.
- November 26, 1967: The active pool members reaffirmed in Frankfurt their intention to continue stabilizing the gold market close to the official price.
- March 10, 1968: A renewed statement by the participating central banks in Basel failed to calm the demand for gold.
- March 12: An internal memorandum to President Lyndon B. Johnson stated that an additional $500 million and another $500 million in an emergency would only last a few days given the demand at the time.
- March 14: Another memorandum put the day’s loss at $372 million and warned of a possible loss of $1 billion the following day.
- March 15: The London gold market remained closed. In Paris, the price temporarily rose to more than $44.
- March 16th and 17th: The central bank governors of the seven active gold-collecting countries met in Washington and ended the supply of gold to private markets from official reserves. At the same time, they extended the closure of the London gold market until March 29.
The pool’s operational intervention thus ended on March 15 with the market closure. The political decision regarding the new system was published on March 17. Both dates are part of the story of the collapse; neither should be used as the sole endpoint without explanation.
What was the two-tier gold market?
The Washington agreement did not immediately abolish the official price of $35. The United States intended to continue buying and selling gold with foreign monetary authorities at this price. However, officially held gold would henceforth only be used for transfers between monetary authorities. The participants agreed to cease supplying the London or other private gold markets.
This resulted in two price ranges:
- In official circles, the parity of 35 US dollars per troy ounce continued to apply to transactions between monetary authorities.
- In the private market, the price of gold should be determined by supply and demand.
The market reopened on April 1st. The five bullion brokers fixed a price of $38 per troy ounce – 8.6 percent above the official parity. At the same time, the quotation changed from sterling to dollars; in addition to the morning fixing at 10:30 a.m., another was added at 3:00 p.m. for the American markets. The LBMA gold price auctions continue to this day, both in the morning and afternoon, although procedures and oversight have been fundamentally changed. This meant that the private gold price was deregulated more than three years before the Nixon shock; the American guarantee for the conversion of official dollar holdings also ended in 1971.
Was the London Gold Pool a gold price manipulation?
In a broader economic sense, the London Gold Pool deliberately influenced the market price. Participants bought and sold gold with the express aim of limiting price fluctuations and protecting the dollar-gold parity. It would be wrong to deny this documented intervention or to portray it as mere theory.
The term “manipulation” still requires clarification. The pool was a monetary policy market intervention coordinated by monetary authorities. This distinguishes it from fraudulent trading practices such as spoofing, where traders deceive other market participants with orders placed without the intention of execution. This distinction is discussed in detail in the article “Manipulation in the Gold and Silver Market: What is Proven – and What Isn’t” .
The London Gold Pool demonstrates that governments and central banks intervened jointly in the gold market during a clearly defined period. It does not prove that these same institutions have continuously controlled the gold price ever since. The intervention at that time was based on a special monetary system, an official gold parity, and the convertibility of dollar reserves for foreign monetary authorities. These conditions no longer exist today.
The outcome also demands precise conclusions. The pool kept the London price within a narrow range for years. When imbalances and demand became too great, the members were no longer willing to bear the necessary sales, either politically or financially. The intervention ended – not the market.
From the Gold Pool to the Nixon Shock of 1971
March 1968 marked a deep rift in the Bretton Woods system, but not its complete demise. Official gold transactions between monetary authorities initially continued. At the same time, the free market price clearly demonstrated that gold was valued higher outside the official system.
This separation did not permanently stabilize the remaining dollar-gold link. On August 15, 1971, President Richard Nixon suspended the convertibility of the dollar into gold for foreign official holders. The article on the Nixon Shock of 1971 and the end of the dollar-gold peg explains exactly what was ended at that time and why the system of fixed exchange rates only completely collapsed later. The historical foundations of the different gold and currency systems are also covered in the overview “Gold as a Means of Payment and the Gold Standard .”
Frequently Asked Questions about the London Gold Pool
What was the London Gold Pool?
The London Gold Pool was an informal collaboration of eight monetary authorities. From 1961 to 1968, the Bank of England bought and sold gold on their behalf to keep the London market price close to the dollar-gold parity.
Which countries were members?
Members were the USA, Great Britain, West Germany, France, Italy, Belgium, the Netherlands, and Switzerland. The USA contributed 50 percent of the initial quota.
What role did Germany play?
The Bundesbank held the largest initial quota in Europe at 11 percent. West Germany was thus the second-largest participant after the USA.
Did the pool keep the London gold price exactly at $35?
No. $35 was the official US price. Commissions, transport, and insurance pushed the relevant London price ceiling to approximately $35.20.
Did the pool sell only gold?
No. When supply was high, the Bank of England bought gold for the group and distributed it according to agreed rules. In its early years, the pool was sometimes a net buyer.
Did France withdraw from the London Gold Pool in 1967?
France suspended further contributions in June 1967 but retained its existing participation and did not declare a formal public withdrawal. Seven members remained active in the final phase.
Why did the London Gold Pool collapse?
Demand and losses became too great. US balance of payments problems, inflation, declining gold reserves, a limited supply of new gold, and especially the devaluation of the pound in November 1967 triggered the flight to gold. In March 1968, the members ceased supplying the market.
Was the London Gold Pool a state-sponsored gold price manipulation?
It was a documented government market intervention aimed at deliberately influencing prices. In a broader economic sense, this can be called manipulation, but it is distinct from fraudulent practices such as spoofing.
What happened after the pool closed?
A two-tiered gold market emerged: Official transactions remained at $35, while the private price was deregulated. London opened on April 1, 1968, with an initial fixing of $38.
What is the connection to the Nixon shock?
The joint defense of the private market price ended in 1968; in 1971, Nixon ended the convertibility of official dollar reserves into US gold. These were separate, successive breaks with the Bretton Woods system.
Conclusion
The London Gold Pool was neither a myth nor an all-powerful, permanent control mechanism. Eight central banks pooled their interventions to keep the London market price close to the official dollar-gold parity. The cooperation at times involved large purchases of gold, but ultimately failed due to a loss of confidence and unsustainable sales.
That is precisely why this example remains insightful to this day. It shows how far government intervention in a market can go – and where its limits lie when the economic foundations no longer justify the defended price.
About the author
Dirk Wasserthal is co-founder and managing director of Wasserthal RareCoin.Store. He focuses on the history of gold coins, the role of gold in different monetary systems, and the transparent classification of metal value, rarity, condition, and collector value.
Transparency note
Wasserthal RareCoin.Store deals in rare, certified gold coins and therefore has a financial interest in the gold and collector coin market. This article serves solely for historical and general economic information. It does not constitute individual investment, legal, or tax advice. Historical market interventions do not allow for reliable predictions about future gold prices or the effects of current monetary policy measures.
This article primarily uses contemporary publications from central banks, official government documents, and records from international institutions. Later research is consulted where it does not directly evaluate publicly accessible central bank archives or where it verifies widely held views using new data.
Sources
- Bank of England: The London Gold Market , Quarterly Bulletin, March 1964.
- Board of Governors of the Federal Reserve System: Treasury and Federal Reserve Foreign Exchange Operations and the Gold Pool , Federal Reserve Bulletin, March 1964.
- Bank for International Settlements: 38th Annual Report , Basel 1968, in particular the sections on the gold crisis of 1967/68.
- Bank of England: Commentary , Quarterly Bulletin, June 1968.
- US Department of State, Office of the Historian: FRUS 1964–1968, Volume VIII, Document 187 , Memorandum on the Gold Problem, March 9, 1968.
- US Department of State, Office of the Historian: FRUS 1964–1968, Volume VIII, Document 188 , memorandum dated March 12, 1968.
- US Department of State, Office of the Historian: FRUS 1964–1968, Volume VIII, Document 189 , Decision on the closure of the London gold market, March 14, 1968.
- US Department of State, Office of the Historian: FRUS 1964–1968, Volume VIII, Document 191 , Washington Conference and Communiqué of March 17, 1968.
- Federal Open Market Committee: Memorandum of Discussion, March 14, 1968 and Memorandum of Discussion, April 2, 1968 .
- Michael D. Bordo, Eric Monnet and Alain Naef: The Gold Pool (1961–1968) and the Fall of the Bretton Woods System: Lessons for Central Bank Cooperation , Journal of Economic History, 2019.
- Alain Naef: The Gold Pool and The 1967 Devaluation and the Fall of the Gold Pool , in: An Exchange Rate History of the United Kingdom, 1945–1992, Cambridge University Press 2022.
- International Monetary Fund: Gold , Annual Report of the Executive Directors for the Fiscal Year Ended April 30, 1968, Chapter 7.
- London Bullion Market Association: March 1968 and the London Gold Fixing , a historical overview of the market’s closure and reopening.
Sources last checked in August 2026.
