The Gold Standard Act of 1900 formally placed the United States on the gold standard, making gold the sole basis for the nation’s currency. President William McKinley signed the Act into law on March 14, 1900, establishing the value of one dollar at 25.8 grams of 90% pure gold. The weight specifications fixed the price of gold at $20.67 per troy ounce. The Act also required that all paper money be backed by gold reserves.
This law marked the culmination of decades of economic debate and officially ended silver as a standard monetary metal in the U.S. The Act provided stability to financial markets and reassured foreign investors but also restricted monetary flexibility, leading to economic hardships in some sectors.
The Gold Standard and the Official Weight and Purity of Gold Coins
The Gold Standard Act of 1900 set the U.S. dollar’s value to equal to 25.8 grams of 90% pure gold. Under this law, all gold coins minted by the U.S. Treasury had to conform to strict weight and purity specifications:
- Gold Double Eagle ($20 coin): Weighed 516 grains (33.44 grams), composed of 90% gold and 10% copper.
- Gold Eagle ($10 coin): Weighed 258 grains (16.72 grams), composed of 90% gold and 10% copper.
- Half Eagle ($5 coin): Weighed 129 grains (8.36 grams), also 90% gold.
- Quarter Eagle ($2.50 coin): Weighed 64.5 grains (4.18 grams), 90% gold.
These specifications ensured that all legal tender gold coins contained a consistent amount of gold, further reinforcing gold’s exclusive role in U.S. currency.
In addition to designating the standard weight of the U.S. dollar in relation to gold, the Act declared that all paper currency would be backed by gold at a fixed rate of $20.67 per troy ounce. Since paper money was only backed by gold and not silver, the law eliminated silver’s role as an alternative store of value.
Immediate Impact
The shift to a strict gold-backed currency had lasting consequences, and the Gold Standard Act of 1900 reshaped daily life for Americans across different economic classes.
- The repercussions of the Act walloped farmers. With gold-backed money ensuring a tight monetary supply, inflation remained low, making it difficult for farmers to repay loans. Farmers in the Midwest and South, who relied on credit for equipment and land, found their debts more burdensome as the value of money remained stable, but crop prices fluctuated. Many had supported bimetallism, hoping the inclusion of silver would create inflation and ease their financial pressures. Instead, they faced prolonged deflation, which eroded their purchasing power.
- Industrial Workers saw mixed effects. While the gold standard reassured investors, leading to economic stability and job growth in manufacturing and finance, it also kept wages from rising significantly.
- Wealthy investors and bankers benefited the most from being on the gold standard. Those who held wealth in gold-backed assets saw their value remain intact, ensuring stable returns on their investments. New York financial institutions, supported by a strong and predictable currency, expanded their reach internationally, making the U.S. a safer place for global investment.
- Silver miners suffered immensely as the price of silver declined. In Nevada, Colorado, and Idaho, towns that relied on silver mining faced economic decline. Without a demand for silver in the monetary system, mines shut down, leading to mass unemployment in silver-producing regions. Many miners had to seek work elsewhere, often relocating to urban centers or transitioning to other industries.
The Crime of 1873: The Beginning of the Battle Over Gold and Silver
The Coinage Act of 1873, later called the “Crime of ’73”, eliminated the silver dollar as legal tender and demonetized silver in favor of gold. At the time, many Americans did not recognize the long-term consequences. However, as silver production skyrocketed in the Western U.S., farmers and miners realized that the Act artificially reduced silver’s role in the economy, limiting their earning potential and access to capital. The phrase “Crime of ’73” became a rallying cry for those who believed the government had intentionally rigged the economy to favor Eastern financial elites at the expense of rural and mining communities.
The Free Silver Movement Gains Momentum
By the late 19th century, silver miners and Midwestern farmers launched a major political campaign against gold’s dominance. The Free Silver Movement fought for the free coinage of silver, believing it would:
- Expand the money supply, making obtaining credit and repaying debts easier.
- Increase crop prices, giving farmers greater financial security.
- Revitalize rural economies, particularly in the West, where silver mining was an economic driver.
This movement gained traction with Democratic and Populist politicians, especially William Jennings Bryan, who became the leading voice for Free Silver. The movement’s supporters believed that gold-backed money only benefited bankers and industrialists, while silver-backed currency would help the working class.
The Bland-Allison Act and the Sherman Silver Purchase Act
Congress attempted compromise measures to address gold and silver advocates.
- Bland-Allison Act (1878): Required the U.S. government to buy between $2 million and $4 million in silver per month and coin it into silver dollars.
- Sherman Silver Purchase Act (1890): This Act increased the amount of silver bullion the government was required to buy and issued paper currency backed by silver.
However, these acts failed to satisfy both sides. Silver advocates wanted unrestricted coinage, while gold supporters believed the measures caused inflation and economic instability. The repeal of the Sherman Silver Purchase Act in 1893 further intensified tensions, setting the stage for the Gold Standard Act of 1900.
The 1896 Presidential Election: A Nation Divided Over Gold and Silver
The 1896 presidential election became a showdown between Republican William McKinley, a strong proponent of the gold standard, and Democrat William Jennings Bryan, the leader of the Free Silver Movement.
- Bryan’s “Cross of Gold” Speech electrified silver supporters. He declared, “You shall not crucify mankind upon a cross of gold,” attacking the gold standard as a policy that crushed farmers and workers. This speech earned him the Democratic nomination for president and set him up against William McKinley.
- McKinley’s Pro-Gold Campaign received strong financial backing from industrialists and bankers. He campaigned for economic stability, arguing that gold provided financial security for the nation.
McKinley’s victory solidified the move toward gold, which investors and financial institutions saw as a step toward long-term stability.
The 1900 Presidential Election and the Signing of the Gold Standard Act
Four years later, McKinley and Bryan faced off again in the 1900 election, but this time, the economy had improved under a de facto gold standard. Bryan again advocated for the unlimited coinage of silver, but with economic conditions strengthening, McKinley’s support for gold was more popular than ever.
McKinley won re-election in a landslide, and shortly after, on March 14, 1900, he signed the Gold Standard Act into law, officially establishing gold as the sole basis for U.S. currency.
The Specie Resumption Act of 1875 and Paper Money Redemption
The Gold Standard Act built upon the earlier Specie Resumption Act of 1875, which restored the ability of Americans to exchange paper currency for gold. The Act solidified gold-backed currency as a permanent U.S. policy, ensuring that Federal Reserve Notes (introduced in 1913) would also be tied to gold for the foreseeable future.
The Great Depression and the Abandonment of the Gold Standard
The gold standard remained in place for over three decades after the Gold Standard Act of 1900 passed. Economic challenges in the early 20th century began to reveal its weaknesses. The Great Depression of the 1930s put immense strain on the monetary system, as the fixed supply of gold-backed currency limited the government’s ability to respond to the economic crisis.
By the early 1930s, bank failures surged, unemployment skyrocketed, and deflation worsened, making debts even more difficult to repay. Many economists and policymakers began questioning whether the gold standard was too restrictive during economic downturns.
In 1933, President Franklin D. Roosevelt took dramatic action by signing Executive Order 6102, which required Americans to turn in their gold coins, bullion, and gold certificates to the government in exchange for paper money. This effectively ended the use of gold as a circulating currency. The following year, the Gold Reserve Act of 1934 devalued the dollar and raised the official price of gold from $20.67 per ounce to $35 per ounce, further reducing the gold standard’s role in domestic monetary policy.
Though the gold standard persisted in a limited form under the Bretton Woods System after World War II, the U.S. officially abandoned it entirely in 1971, when President Richard Nixon ended the convertibility of U.S. dollars into gold, severing the last link between gold and paper money.
The Lasting Legacy of the Gold Standard Act
The Gold Standard Act of 1900 ensured financial stability but restricted economic growth. While the gold standard no longer exists, its influence on monetary policy, gold reserves, and global finance remains a topic of debate. From legal tender gold coins to the evolution of Federal Reserve Notes, the Gold Standard Act shaped the U.S. financial system for decades, leaving a lasting mark on economic history.
