FactSentinel

The United States dollar has not been backed by gold since 1971, when President Richard Nixon ended the direct convertibility of dollars to gold. This action, known as the "Nixon Shock," terminated the Bretton Woods system and established the dollar as a fiat currency—meaning its value is derived from government decree and public trust rather than any physical commodity. Today, the dollar's value is supported by the strength of the U.S. economy, the government's ability to tax and manage monetary policy, and its widespread acceptance in global trade.

Prior to 1971, the U.S. maintained a gold standard where dollars could be exchanged for a fixed amount of gold, and before 1933, American citizens could redeem paper currency for gold coins. However, the modern monetary system operates entirely differently. The Federal Reserve now manages the money supply through interest rates and other policy tools, without any requirement to hold gold reserves equivalent to the currency in circulation. While the U.S. government does maintain significant gold reserves at Fort Knox and other facilities, these holdings serve as assets on the national balance sheet rather than backing for the currency.

This misconception persists partly because the gold standard existed for much of American history and because some people believe currencies must be tied to tangible assets to have value. In reality, all major global currencies today are fiat currencies, operating successfully based on economic fundamentals and institutional credibility rather than precious metal reserves.