Welcome to our new regular feature, Curator’s Corner, in which LBMA’s former CEO and resident artefact expert Stewart Murray – the man behind the Wonders of Gold – turns the spotlight on his favourite items from our online exhibition.
The Times, on Monday 18 March 1968, describes the new arrangements for the gold price that will follow the two-week closure of the London gold market and the protests outside the US Embassy against the war in Vietnam.
We begin this series by turning the clock back to March 1968 and the closure of the London gold market, which spurned historical implications for the Gold Fixing.
In this first edition, we focus on a new item contributed by Rachel Harvey of Columbia University, which complements her two previous items on the history of the London Gold Fixing in the Exhibition, explains Stewart Murray.
It describes the two-week closure of the London Gold Market at the behest of the US authorities in the second half of March 1968. It thus sets the scene for the article by Rachel and Adrian Ash (see 50 Years On, Who Killed Gold Money?), describing President Nixon’s closing of the Gold Window on 15 August 1971. It is interesting that the front page of The Times on Monday, 18 March 1968 focused not just on the closing of the gold market, but also on the war in Vietnam, which was one of the main reasons for the pressure on the dollar. Read on to find out more.
March 1968 and the London Gold Fixing
By Rachel Harvey, Center on Global Economic Governance, Columbia University
Throughout the 1960s, the London Gold Fixing acted as a barometer for confidence in the US dollar. In the post-Second World War era, the US dollar was the world’s primary reserve currency and vehicle for financing trade. Under this system, it was the only currency backed by gold (at $35 per fine troy ounce). All other currencies were convertible into the US dollar at fixed exchange rates. It was the precious metal’s role in the international monetary system that transformed the Gold Fixing’s establishment of a publicly visible gold-price benchmark into a daily ritual of confidence in the ability of the US to support the gold-dollar parity – an issue that became increasingly important in the 1960s with the growth in US overseas commitments and the level of US dollars circulating internationally.
Tensions first erupted when the gold price in London rose several dollars over parity in October 1960. This ‘Gold Crisis of 1960’ signalled that trading in the Gold Fixing was becoming an early warning system of pressure mounting against the US dollar. As the decade continued, this pressure was ever present. In reaction, eight of the most prominent central banks created a ‘pool’ of gold bars that could be used to keep the London price from rising above $35.20 during speculative attacks. By curtailing arbitrage opportunities, it would alleviate immediate strains on US gold stocks. These arrangements worked effectively for several years. In the second half of the decade, however, pressure grew and, in 1968, the gold pool’s ability to counter speculative pressure reached a crisis point.
On Friday 15 March 1968, the US government asked the UK Treasury to close the Gold Fixing and the London over-the-counter market. Over the weekend, monetary authorities met in Washington DC to sort out the international financial situation.
On Friday 15 March 1968, the US government asked the UK Treasury to close the Gold Fixing and the London over-the-counter market. Over the weekend, monetary authorities met in Washington DC to sort out the international financial situation.
As part of their conversation, they extended the closure to 29 March.
When gold trading resumed, on 1 April 1968, the financial landscape was dramatically different. The international gold market had been split into two segments. In the first tier, the gold-dollar parity price was maintained, but only central banks and national financial authorities could trade in it. The second segment was a free gold market in which the price of gold was allowed to fluctuate according to supply and demand. Only institutions and private citizens permitted to own gold could trade in this tier. It was in this portion that the Gold Fixing and the over-the-counter market belonged.
Along with these changes, a second (afternoon) Gold Fixing was added for the benefit of Canadians, Americans and South Americans who preferred “to see the state of the market when they were awake”. This signalled a trend that accompanied the gradual demonetisation of gold over the next decade. London became one of several critical nodes in a network of gold dealing centres that emerged in the 1970s.
Whereas, prior to 1968, the world came to London to buy gold, afterwards, the members of the Gold Fixing increasingly turned their attention to developing a round-the-world, round-the-clock gold market.
When gold trading resumed on 1 April 1968 the financial landscape was dramatically different
The Mocatta Fixing Book in March 1968: A morning fixing in shillings and pence per fine troy ounce and its equivalent in US dollars.
The Mocatta Fixing Book in the first half of April 1968: A new afternoon fixing has been squeezed in, with the dollar price taking priority over shillings and pence.
We would love your feedback on the items featured in the Wonders of Gold exhibition or on any ideas you may have on items to include.
Whether it’s a gold artefact, a significant historical event or influential person who helped shape the gold market – we want to hear from you.
You can get in touch with Stewart Murray, the Curator of Wonders of Gold, at: curator@LBMA.org.uk
You can take a look at the March 1968 and the London Gold Fixing entry within the Wonders of Gold exhibition.
