Money was weird in 1930. Imagine walking into a bank today and demanding they swap your digital balance for physical bars of yellow metal. They'd laugh at you. But back then, that was the law. Then, suddenly, it wasn't. Understanding the price of gold during the depression isn't just a history lesson; it's a look at the most radical "reset" button the U.S. government ever pushed.
Gold was $20.67 an ounce.
It had been that price for decades. To a person living in 1929, that number felt like a law of physics, as immutable as gravity. If you had twenty bucks, you basically had an ounce of gold. Then the stock market took a header off a skyscraper, and the entire global economy started to melt like an ice cube on a radiator.
The $20.67 Fiction
When the Great Depression hit, people panicked. Obviously. When people panic, they want "real" things. In the 1930s, "real" meant gold. People started hoarding it under floorboards and inside mattresses because they didn't trust the banks—and honestly, they shouldn't have. Banks were failing by the thousands.
This created a massive problem for the Federal Reserve. Under the gold standard rules of the time, the government had to keep a certain amount of gold to back up the paper currency in circulation. As people cashed in their paper for gold, the "gold cover" shrank. To stop the bleed, the Fed did something that seems insane now: they raised interest rates. They wanted to make holding dollars more attractive than holding gold.
It backfired.
High interest rates in a collapsing economy are like throwing a bucket of water on a drowning man. It made borrowing impossible and sped up the deflationary spiral. While the official price of gold during the depression stayed at $20.67 initially, the value of that gold was skyrocketing because the prices of everything else—wheat, houses, labor—were plummeting.
The 1933 Heist (Or Salvation?)
Franklin D. Roosevelt took office in March 1933, and he didn't waste time. He realized he couldn't fix the economy while tied to a fixed gold price. He needed to inflate the currency to get prices back up. But he couldn't do that if everyone could just demand gold for their devalued dollars.
So, he did the unthinkable.
Executive Order 6102.
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If you haven't heard of it, it's wild. Roosevelt basically told every American: "Give us your gold, or go to jail." You were allowed to keep a small amount of jewelry and some collectible coins, but otherwise, you had to hand over your bullion and coins to the Federal Reserve in exchange for $20.67 in paper money.
People complied. Mostly because they were scared and patriotic, but also because a $10,000 fine and 10 years in prison is a pretty strong incentive.
Once the government had most of the gold, FDR pulled the rug out. In 1934, via the Gold Reserve Act, he officially changed the price of gold during the depression from $20.67 to $35.00 an ounce.
Just like that, the government’s gold became about 69% more valuable on the books. The dollar was devalued. This was a deliberate move to spark inflation and help farmers and debtors who were being crushed by the weight of "expensive" dollars.
Why the Price Stayed "Flat" but the Value Exploded
It’s easy to look at a chart and see a flat line at $20.67, then a jump to $35, and think, "Gold didn't do much."
That’s a mistake.
You have to look at purchasing power. In 1929, $20.67 bought a very nice custom-tailored suit. By 1932, while the gold price was the same, that same ounce of gold could buy two or three suits, plus a lot of groceries. Prices for consumer goods fell by about 25% to 30% between 1929 and 1933. If you held gold (legally or otherwise), your wealth grew massively relative to the world around you.
Compare this to the stock market. The Dow Jones Industrial Average lost nearly 90% of its value from its peak to its 1932 trough. If you had $1,000 in stocks, you had $100. If you had $1,000 in gold, you still had $1,000—and that $1,000 bought way more stuff than it used to.
The Mining Boom Nobody Mentions
Because the price of gold during the depression was fixed by the government while the cost of labor and equipment was falling, gold mining became the most profitable business on the planet.
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Think about it.
If you’re a copper miner, your costs are down, but the price of copper has crashed because nobody is building anything. You’re broke. But if you’re a gold miner, your "customer" (the government) is guaranteed to buy every single ounce you produce at a fixed, high price. Your labor costs have dropped because people are desperate for work. Your fuel costs are down.
Gold production surged. Old mines in California and Alaska that hadn't been touched since the 1800s were suddenly reopened. It was a localized "Gold Rush" in the middle of a national breadline.
Was the Gold Standard the Villain?
There is a huge debate among economists like Milton Friedman and Ben Bernanke about whether the gold standard actually caused the Depression.
The consensus among many modern academics is that the "golden fetters" prevented the Fed from expanding the money supply when the economy needed it most. Because the price of gold during the depression was pegged, the Fed couldn't just print money to save failing banks without breaking the peg.
Other "Austrian school" economists argue the opposite. They suggest the Depression was the result of the credit bubble of the 1920s, and the gold standard was just the messenger telling the world the party was over.
Whichever side you take, the reality for the average person was the same: the government eventually chose the survival of the banking system over the "sanctity" of the $20.67 gold peg.
What This Means for Today
People often ask if the government could "confiscate" gold again.
Technically? Yes.
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Likely? Probably not in the same way. In 1933, gold was the monetary system. Today, gold is just another asset class, like tech stocks or real estate. The government doesn't need your gold to manage the dollar anymore because we’ve been on a pure "fiat" system since Richard Nixon finished what FDR started in 1971.
However, the lesson of the price of gold during the depression remains: When things get bad enough, the "rules" of money can change overnight.
If you’re looking at gold as a hedge, remember these three takeaways from the 1930s:
- Purchasing power is king. The nominal price matters less than what that price buys. Gold was "flat" for years, yet it was the best-performing asset because everything else was dying.
- Counterparty risk is real. People ran to gold because banks failed. If you hold gold through a digital ETF or a "paper" contract, you're still relying on a system. In the Depression, physical possession was the only thing that counted—until the government made it illegal.
- Liquidity disappears. During the worst of the 1930s, having an asset was one thing; finding someone to buy it from you at a fair price was another. The government became the only buyer for gold, which meant they dictated the terms.
Practical Steps for Modern Investors
Don't just read the history; use it. If you're worried about economic instability, history suggests a few moves.
First, look at the "Gold-to-S&P 500" ratio. This tells you if gold is cheap or expensive relative to stocks. During the Depression, this ratio went through the roof.
Second, if you're buying gold, consider a mix of forms. Coins (like Eagles or Maples) are more recognizable if you ever actually need to use them for trade, though in 1933, "numismatic" or collectible coins were actually exempt from confiscation. Many people today buy pre-1933 gold coins for exactly this historical reason.
Finally, watch the real interest rates. Gold hates high real rates. In the early 30s, real rates were effectively high because of deflation. Once FDR devalued the dollar and raised the price of gold during the depression, real rates plummeted, and gold (and the economy) finally found a floor.
History doesn't repeat, but it definitely rhymes. The 1930s taught us that "fixed" prices are only fixed until they aren't, and the most stable asset in the world can become "contraband" with a single signature in the Oval Office.
Keep your eye on the central banks. They're the ones who moved the price in 1934, and they're the ones buying record amounts of bullion today. They know the history better than anyone.
To apply this knowledge, start by auditing your portfolio's "crisis weight." Most experts suggest 5% to 10% in precious metals as a "fire insurance" policy. It isn't about getting rich; it's about making sure that if the "rules" of money change again, you aren't starting from zero. Verify the current premiums on physical gold versus spot prices, as high premiums often signal the same kind of "hoarding" behavior seen in 1931 before the official price reset.