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The price of gold per ounce soared past $2,700 in October as inflation and other economic concerns drove demand, while Treasury bonds began offering their highest returns in years.
Treasury holdings of gold in the US tripled from 6,358 in 1930 to 8,998 in 1935 (after the Act) then to 19,543 metric tonnes of fine gold by 1940. [3] The revaluation of gold referenced was an active policy decision made by the Roosevelt administration in order to devalue the dollar. [4]
The Gold Standard Act was an Act of the United States Congress, signed by President William McKinley and effective on March 14, 1900, defining the United States dollar by gold weight and requiring the United States Treasury to redeem, on demand and in gold coin only, paper currency the Act specified. [1]
The Gold Reserve Act of 1934 made contractual gold clauses unenforceable. It also allowed the President to change the gold content of the US dollar by proclamation. Immediately following its passage, Roosevelt changed the gold content of the dollar from $20.67 to $35 per ounce, thereby devaluing US federal reserve notes, which were backed on gold.
That has helped weaken the historical correlation between bond yields and gold prices. While lower rates are still bullish for gold, which doesn’t pay interest or dividends, higher rates don’t ...
"From 1966 through 2020, an index of gold prices advanced 8.37% annualized when the Fed was lowering interest rates … compared to 5.53% when raising interest rates," Robert R. Johnson, chairman ...
Bankers Trust Co. 294 U.S. 240 (1935): The bearer of a $22.50 bond coupon of the Baltimore & Ohio Railroad demanded payment of $38.10, the value of the coupon's gold obligation based on the statutory price of gold.
The calculation of bond prices due to the change in time to maturity can also be easily figured based on some relatively simple math, giving investors a clear idea of a bond’s expected price.