From Metal to Money: The History of the U.S. Dollar and Its Bond With Gold & Silver

The dollar you have is more than just money; it’s part of a long story. It all began with Spanish silver coins, which were used in colonial America. Then it went through a system that used both gold and silver. We are now living in a time when transactions happen online.

The history of the U.S. dollar can help us understand why gold and silver are still considered effective ways to store wealth. As fiat currencies evolve and more money is printed, it’s essential for investors concerned about inflation and monetary policy to be aware of this history.

Read on to find out why owning real precious metals can still be a good way to protect your money in 2025.

Origins and Early Support (Silver and the Spanish Dollar)

The Continental Congress had to approve the first official currency in America before it could be used. The Spanish silver dollar, also known as the “piece of eight,” was very important to colonial merchants. It was widely used in the New World. These eight real coins became so trusted over time that early Americans used them to make their whole decimal money system. The famous cheer “Two bits, four bits, six bits, a dollar!” stems from the practice of cutting the Spanish dollar into eight pieces.

First Guidelines

The Coinage Act of 1792 made this connection official by creating the U.S. Mint and linking the new dollar to a bimetallic system. According to the U.S. Treasury’s official currency history, “Congress passed ‘The Mint Act,’ which set up the coinage system in the U.S. The U.S. also uses the decimal system for money.” This law set the gold-to-silver ratio at 15 to 1, and the silver dollar had 371.25 grains of pure silver in it.

The system was relatively straightforward. Americans mostly used silver for small transactions and gold for big business deals and trade with other countries. This two-metal system met the needs of a growing economy, where different denominations were useful for different types of business.

From Bi-metallic to the Gold Standard

The mid-1800s marked a period of significant changes in American monetary policy, particularly when political and economic pressures led to what critics termed the “Crime of 1873.” The “Crime of 1873” was the first step in the process of demonetizing silver, which led the country to a gold-only standard. This change happened slowly at first, but it picked up speed because gold was a much more stable currency, especially for trade between countries.

The Gold Standard Act of 1900 made it official that America would use gold as its backing asset. It set the value of the dollar at $20.67 per ounce. According to Treasury records, this system required the government to keep gold reserves equal to 40% of the money it had issued. It also stated that you could always exchange your dollars for gold.

The Federal Reserve was set up in 1913. At first, it strengthened the gold standard by centralizing monetary policy and keeping the ability to change money into gold and back again.

But the Great Depression put this system to the test when Americans rushed to turn their bank deposits into gold. This led President Franklin D. Roosevelt to abandon the gold standard in 1933.

This was when the American Gold Standard began to show signs of weakness in its defense against monetary policy. Under FDR’s Executive Order 6102, people had to give up their gold, and in return, they got $20.67 for each ounce of gold they had. However, as soon as the government acquired the gold it needed, it immediately changed its value to $35 per ounce. This was a shocking 69% drop in value that showed how weak the dollar was even under the gold standard.

The Bretton Woods Era and the Dollar as the World Reserve

The United States’ monetary position underwent significant changes during World War I. The U.S. built up substantial gold reserves, which helped enhance the dollar’s reputation around the world. The U.S. was stockpiling gold while Europe was using up its treasuries to pay for its war efforts.

The New Global Financial System

The Bretton Woods Agreement in 1944 set up a new global financial system and made the U.S. dollar the main reserve currency. In this system, foreign currencies were tied to the dollar, which could still be traded for gold at a price of $35 an ounce. This made the U.S. the center of the world’s financial system, and other countries viewed the dollar as just as safe as gold.

The Smithsonian Agreement (pegging a number of industrialized state to the US dollar) in 1971 was the last attempt to make this system more stable. Even though the values of currencies changed and the price of the dollar went up to $38 per ounce of gold, the main problem remained: the U.S. was printing more dollars than it had gold to back them up.

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