How Bretton Woods Broke and Gold Became Free
Peter McGahan
Monday 3rd November, 2025.
IN the second of the series on ‘investing’ in gold where I have discussed the birth of gold as a payment system, let’s cover how cracks appeared very quickly.
After World War Two, the world was exhausted and searching for structure. Ration cards and rubble gave way to grand visions. In 1944, at Bretton Woods in New Hampshire, delegates from 44 nations built a bold new architecture. The US dollar would anchor the world economy, pegged to gold at $35 per ounce. Other currencies would tie themselves to the dollar. Gold remained the key reference point.
For nearly three decades, it worked. Then along came the Belgian-American economist named Robert Triffin with different ideas. His insight, now called the Triffin Dilemma, was simple. If the US dollar was to be the world’s reserve currency, it needed to be in global supply. But the more dollars circulated worldwide, the fewer gold bars there were in Fort Knox to back them.
Triffin’s warning was initially ignored. By the 1960s, the cracks were as visible as really visible cracks. Countries began quietly redeeming dollars for gold, draining US reserves. France, in a ‘French moment’, sent a battleship to New York Harbour to collect its gold in person.
On August 15, 1971, President Nixon took to television (on a Sunday evening so markets couldn’t react immediately) and calmly announced that the US would “temporarily” suspend gold convertibility (you hand in your coat (gold), get a ticket (dollars), and you can reclaim your coat whenever you want by presenting the ticket). The dollar was now paper - freed from its gold anchor.
The financial world didn’t collapse overnight. But something very important had shifted. For centuries, gold had been money. Now, it was just a thing - an asset, no longer tied to any currency, set loose to find its own value.
Enter the economic historian, Roy Jastram. His research mapped gold’s purchasing power over centuries. What he found was counterintuitive: during the gold standard era, gold didn’t rise with inflation. In fact, its value often fell. Why? Because gold’s price was fixed. Inflation pushed up the price of bread and rent, but your sovereign, or Krugerrand stayed worth what the peg said it was.
That’s what changed after 1971. Now untethered, gold began to float. And when inflation returned in the 1970s, gold soared. By 1980, it had reached $850 per ounce - a meteoric rise, largely driven by fears that fiat money was spinning out of control.
This behavioural flip, from a price anchor to an inflation hedge, explains a great deal of modern muddle and confusion. Pundits love showing meaningless twaddle gold price charts from 1800 to today, drawing neat trendlines over two centuries as if the rules were constant. That’s like timing an athlete’s lap before and after the starting gun. The race had changed. The track changed. The shoes changed. Comparing pre and post 1971 gold is like comparing sailboats to planes. They both travel. That’s it.
By 1974, just three years post-Nixon, gold futures began trading in the US. For the first time, you could take a position in gold without owning a single ingot. This made it accessible. Well, sort of. Futures were still complex, and largely the domain of institutions and commodity traders.
Then came 2004, and the launch of the first major gold exchange-traded fund: SPDR Gold Shares (GLD). Suddenly, any investor with a brokerage account could hold gold alongside their pension or portfolio, no vault or Swiss banker required. Gold was democratised and financialised - a tool in a modern investor’s arsenal.
And yet, beneath all the new mechanisms and modern wrappers, gold’s attraction remained rooted in something timeless - our desire for safety. When people worry that governments might get it wrong - or markets might wobble - gold doesn’t promise income, growth, or innovation. It offers something older: a hedge against human error.
So yes, gold’s role had changed. From a currency anchor to an investment asset. But what hadn’t changed was the emotional undercurrent. Gold is trust, crystallised, that’s it. And since Nixon’s “temporary” suspension, it no longer depends on systems. It reflects our doubt in them.
Next, we’ll explore whether that trust - now traded daily like a tech stock - still earns its place in a modern portfolio by analysing its real returns.
I will write a guide to ‘investing’ into Gold. If you’d like a complimentary copy, please call 01872 222422 or email info@wwfp.net and we’ll send you a copy when it’s published.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
