London Gold Pool

The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.

The central banks coordinated concerted methods of gold sales to balance spikes in the market price of gold as determined by the London morning gold fixing while buying gold on price weaknesses. The United States provided 50% of the required gold supply for sale. The price controls were successful for six years until the system became no longer workable. The pegged price of gold was too low, and after runs on gold, the British pound, and the US dollar occurred, France decided to withdraw from the pool. The London Gold Pool collapsed in March 1968.

The London Gold Pool controls were followed with an effort to suppress the gold price with a two-tier system of official exchange and open market transactions, but this gold window collapsed in 1971 with the Nixon Shock, and resulted in the onset of the gold bull market which saw the price of gold appreciate rapidly to US$850 in 1980.

In July 1944, before the conclusion of World War II, delegates from the 44 allied nations gathered in Bretton Woods, New Hampshire, United States, to reestablish and regulate the international financial systems. The meeting resulted in the founding of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), and was followed by other post-war reconstruction efforts, such as establishing the General Agreement on Tariffs and Trade (GATT). The IMF was charged with the maintenance of a system of international currency exchange rates which became known as the Bretton Woods system.

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