Gold Reserve Act
|Long title||To protect the currency system of the United States, to provide for the better use of the monetary gold stock of the United States, and for other purposes.|
|Nickname(s)||Gold Reserve Act
Gold Reserve Act of 1934
|Enacted by the||73rd United States Congress|
|Public Law||Pub.L. 73–87|
|Stat.||48 Stat. 337|
The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury.
The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in United States Bullion Depository at Fort Knox and other locations. The act also changed the nominal price of gold from $20.67 per troy ounce to $35.
A year earlier, in 1933, Executive Order 6102 had made it a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins. These prohibitions were relaxed starting in 1964 – gold certificates were again allowed for private investors on April 24, 1964, although the obligation to pay the certificate holder on demand in gold specie would not be honored. By 1975 Americans could again freely own and trade gold.
The Gold Reserve Act had economic ramifications far beyond national finance. At that time many contracts stipulated that their monetary terms could be demanded in gold. Such gold clauses were intended to protect against the United States devaluing the dollar. When the Emergency Banking Act of 1933 and the Gold Reserve Act of 1934 outlawed the use of gold, such contracts became sources of controversy. In the gold clause case Norman vs. Baltimore & Ohio Railroad Co., 294 U.S. 240 (1935), the U.S. Supreme Court ruled that gold clauses were invalid. However, Congress later reinstated the option to use gold clauses for obligations (new contracts) issued after October 1977 in accordance with 31 U.S.C. § 5118(d)(2).
The 2008 decision 216 Jamaica Avenue, LLC vs S&R Playhouse Realty Co. established that a gold clause in contracts signed before 1933 was only suspended not erased, and under certain limited circumstances might be reactivated.