Gold Trading in the United States was a touch-y subject in some quarters in Q3 of 1951. A newspaper writer could catch heck if he or she suggested that people in the government were taking advantage of their position to participate in the buying and selling of gold, possession of which was illegal for U.S. citizens.

One daring reporter told of a black market in gold in Europe and England, involving U.S. government people. Denials got pretty shrill until treasury department and military intelligence agents blundered into a couple of gold black market rings and were forced to lock up several smugglers and traders. Critics of this whistle-blower suddenly clammed up, perhaps embarrassed by their naive blind faith .

In actuality, the real grab bag in gold trading profits was strictly legal, according to the way the Truman administration and their British cohorts played it. In fact, the British used the Fort Knox, Kentucky gold hoard like an accordion, and as you might guess they didn’t lose in the process. It was a simple poker game with gold chips and what looked like a stacked deck.

British colonial possessions gouged out a lot of gold from the ground that was promptly turned over to the government, which some derisively labeled as socialist (a popular put-down back in the day). During and for a short period after the end of World War II the British sold to the U.S. $6,020,293,000 worth of that gold at $35 an ounce, the pegged U. S. gold spot price. This gave the British a good profit plus a lot of American dollars for trading in European monetary circles. The dollar most always did better than the pound sterling.

The minute the administration started pouring billions into Britain in the form of European Recovery Program (ERP) money the British quit selling gold to the U. S. They didn’t need to any more; they were getting handout dollars instead. Besides, the price of gold in Europe and Russia went up from $35 an ounce to $57 and even $75.

In fact, the gold selling business got so good for the British that the government started buying back gold from the U.S., naturally at $35 an ounce. During ERP days it purchased a total of $1,120,181,000 worth of gold from Uncle Sam.

Not satisfied with this killing in the gold trade, British buyers sped up their purchases, hauling back to the island from Fort Knox an additional $1,857,452,000 worth since the end of ERP that year.

For well into 1951 the British were buying gold at the highest rate in history. It was running at about $600,000,000 a quarter. And the British weren’t buying it to stick back into the ground. They were selling it, not to the United States but wherever they could get a good price for $35 an ounce U.S. gold.

In addition to buying from the U.S, the British increased their own gold mining production in all colonial possessions. So their production of the previous, five years — at least equal to the six billion dollars worth sold to us during the war and immediately thereafter — was sold somewhere else — not to the U. S. A. Even with U.S. gold purchases, British gold reserves were down to less than three billion dollars, which meant that the British government had dumped almost eight billion dollars worth of gold into European and Soviet exchange markets in the preceeding two or three years.

All of this might have seemed like a painless way to keep the British government afloat, since few U.S. citizens ever had to dig down in their pockets and hand over a gold sovereign to our British cousins in person. But this gold chip poker game had a rigged hand.

With the profit from gold bought at $35 an ounce and sold at a minimum of $57 an ounce the British were able to buy more U.S. gold or reach into European trade markets for raw materials and manufactured goods. With socialism-phobia running rampant, it was considered really bad in some circles that Britain wasn’t spending its gains in countries that were benefiting from U.S. aid. But instead, it was perceived that the British were carrying on a brisk trade with Iron Curtain countries with bargain basement gold from Fort Knox. All that was said to explain the British got along for a while without any more ERP cash from the U.S.A.

So it was that the Gold Trading marketplace was presented with a huge pricing discrepancy, that allowed some big time gold buying and selling opportunities.