Throughout most of U.S. history, American currency was tied to the value of gold, requiring the country to maintain large gold reserves to be able to support a gold standard.

We immediately see that there have been some significant changes to U.S. gold holdings over time. U.S. gold reserves doubled from 1900 to 1913, nearly doubled again from 1913 to 1933, quadrupled from 1933 to 1941, and then halved by 1970.

We also plot the U.S. goods trade balance as a percentage of gross domestic product (GDP) because, under a gold standard, we would expect the U.S. to accumulate gold when it runs trade surpluses and gold to flow out when the U.S. runs trade deficits. In general, we see the U.S. accumulating gold as it ran trade surpluses from 1878 until the early 1920s, but afterward this relationship was tenuous at best as the international payments system experienced heightened uncertainty and significant change.

Conclusion

After World War II, it became obvious that the world needed a new international payments system that incorporated the lessons learned from the previous three decades, and thus the Bretton Woods system was born. The hope was to still have a system with the discipline of gold built in but not too constraining to induce unnecessary economic hardship that nations experienced trying to salvage the gold standard after World War I. Under Bretton Woods, only the U.S. dollar was tied to gold, while other currencies were tied to the value of the U.S. dollar, thereby creating a system of fixed exchange rates. This gold exchange standard indirectly linked other currencies’ value to gold.

However, eventually fear mounted that the U.S. would not be able to meet its commitment to the gold-dollar exchange rate after persistent balance-of-payments deficits led to too many dollars in circulation, so there was a run on U.S. gold reserves in which they were halved by 1970. From 1957 to 1970, the U.S. actually ran slight trade surpluses (about 0.7% of GDP), yet gold flowed out of the U.S. in droves. Although gold indirectly backed the international payments system during Bretton Woods, the mechanism to balance trade flows through the exchange of gold did not function as we saw under the classical gold standard.

President Richard Nixon ultimately ended gold-dollar convertibility in 1971,7 effectively ending the Bretton Woods system; the result was a new system of fiat currency and floating exchange rates. Despite increasing U.S. trade deficits since the end of Bretton Woods, the country’s gold reserves have remained relatively stable (as seen in the figure above ), underscoring the present weak (and possibly nonexistent) link between gold and trade flows.

Below for whole review from link in post

ttps://www.stlouisfed.org/publications/regional-economist/first-quarter-2020/changing-relationship-trade-americas-gold-reserves