Posted:August 20, 2026
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Last Saturday, August 15, 2026, marked the 55-year anniversary of President Richard Nixon officially ending the U.S. Dollar’s convertibility into gold. The announcement, which was marketed as “temporary,” came on a Sunday night after a secretive weekend meeting at Camp David that included Treasury Secretary John Connally, Federal Reserve Chairman Arthur Burns, George Shultz, Paul Volcker, and more.
In 1971, the U.S. dollar was already cemented as the global reserve currency. However, as economist Robert Triffin predicted, this privilege came with costs. For over a decade, the United States had printed massive amounts of dollars to finance initiatives at home and abroad. The recipients of dollars, namely foreign central banks, began to realize that the volume of their dollar reserves was growing too large. Under the Bretton Woods agreement, laid out in 1944, foreign central banks were allowed to turn in their dollars for gold at any time at a fixed price of $35 per troy ounce.
Following World War II, the U.S. held the vast majority of the world’s gold, which served as backing for the U.S. dollar. However, over the years, U.S. gold reserves fell from roughly 700 million troy ounces in 1950 to roughly 275 million troy ounces immediately preceding the 1971 Sunday night announcement.
The 55-Year Fiat Era
With the closing of the gold window, the global monetary system entered a state that had never occurred before in recorded history. For more than a thousand years, nations had experimented with paper currencies. But this marked the first time that all currencies were simultaneously unanchored from gold or any other tangible commodity.1 The U.S. dollar was transformed into a pure fiat currency, a paper liability of the government, backed by nothing but “trust” in the issuing government. Severing this link to gold eliminated the natural restraint on the government’s ability to create paper currency at will.
As I have shown in past articles and in my book, Timeless, the inevitable result of increased money printing or currency creation is the erosion of the purchasing power of the currency’s holder. Stripped of the discipline of gold backing as an anchor, tether, or balance, it unfortunately feeds our natural human desire to inflate, rather than restrain. Since 1971, the U.S. dollar has lost approximately 98% of its purchasing power relative to gold.2
Origins of The Fear Index
There is a metric that I track closely, called “The Fear Index.”3 The Fear Index is a ratio that measures the relationship between the physical gold backing held by nations and the total supply of their money in circulation.
Author James Turk created this metric in the mid-1980s and has subsequently discussed it in numerous publications and books. Turk began his career in international banking, finance, and investments after graduating from George Washington University in 1969. He spent time working for Chase Manhattan Bank, taking him to places like Thailand, the Philippines, and Hong Kong. In the 1980s, he served as Manager of the Commodity Department at the Abu Dhabi Investment Authority in the United Arab Emirates. He left this post in 1987 and began writing the Free Gold Money Report, in which he first introduced the Fear Index.
In 2001, Turk founded GoldMoney (goldmoney.com), a digital platform company allowing investors to buy physical gold online. At the time, this was a highly radical idea. Today, Goldmoney operates as a global, full-reserve, gold-based financial services company, holding roughly $4 billion in client precious-metal assets in custody.
Interestingly, Turk’s Fear Index is modeled on the same calculation that Sir Isaac Newton established in 1696 as Master of the Mint for the Bank of England. Turk credits Sir Isaac Newton as the first person to establish the safety parameters of the classical gold standard. Newton recognized the inherent instability of early fractional-reserve banking. To manage this risk, Newton established a rule requiring the Bank of England to maintain a physical gold reserve in its vaults equal to at least 40% of the outstanding currency in circulation.4
The Fear Index Today
In layman’s terms, and how this applies to us, the Fear Index is a ratio that measures the relationship between the physical gold backing held by the U.S. government and the total supply of U.S. dollars in circulation. To better understand it, Turk presents the U.S. dollar system in terms of a standard balance sheet.5
The Liabilities (U.S. Dollars): Represented by the M2 money supply, which includes physical currency in circulation and digital checking, savings, and money market accounts.
The Assets (Physical Gold): Represented by the 261.5 million troy ounces U.S. gold reserve, which is a tangible asset with zero counterparty risk.
The Fear Index is thus calculated as follows:
As of June, 2026, the current reading is 4.76%. This means that for every $100 of currency in the economy, only $4.76 of its value is backed by physical gold. The remaining $95.24 relies on intangible, debt-based banking promises.
Below is a chart of the Fear Index from 1914 to 2026. The Fear Index is one of many metrics I track to determine the fair value of gold. This is not a timing tool nor a precise valuation tool, and investors should not rely on this metric alone for portfolio decisions. Rather, the Fear Index serves as a measure of the structural health of the fiat monetary system. This calculation can be done for any fiat currency in any country. Another way to observe this metric is to look at what it indicates when it’s both rising and falling.
Figure 1: The Fear Index, 1915-2026
Source: James Turk, FRED M2 via St. Louis Fed, LBMA gold Price via WGC
When the Fear Index is Falling (or low)
A falling or low Fear Index signals confidence in the paper monetary system, in which the population prefers the convenience of paper currency to gold. A depressed Fear Index reveals gold is undervalued relative to the volume of unbacked currency in the system. As history has shown, a low Fear Index also coincides with periods of expanded credit creation, fueling speculative asset bubbles.
For example, during the Tech Bubble in the late 1990s, the Fear Index hovered around 1.4%. This indicated that 98.6% of the dollar’s value was backed by M2. This also coincided with a period in time when the gold market was subjected to a highly coordinated campaign of price suppression by Western central banks and major bullion banks.6
When the Fear Index is Rising (or high)
A high or rising Fear Index signals that trust in the paper monetary system and banking system is eroding. In response, demand for physical gold increases, as investors move purchasing power from paper currency to gold.
For example, the Fear Index reached approximately 30% during the Great Depression, and around 13% during the inflationary 1970s.
The Current Fear Index
Currently, the Fear Index reads 4.8% as of June, 2026. Following a similar measure during the 2008-09 Global Financial Crisis, it fell into the low 1% range and has since risen (see figure 2). Unsurprisingly, the breakout occurred right around the time Russia invaded Ukraine, when the U.S. and Europe froze approximately $300 billion of Russia’s foreign exchange reserves. This event caused many central banks to question the safety of their foreign exchange reserves in U.S. dollars. Subsequently, central banks have been heavy buyers of gold, buying roughly 25-30% of all gold mined per year since 2022.
The latest reading of 4.8% is still well below the average of around 8% for the entire history, indicating there is room to move higher. Turk argues that the trend (up or down) is more important than the actual level, as trends can persist for years. To that end, the current trend is higher, as the index pushed above the 7-year moving average of around 2.5% in mid-2023.
Figure 2: The Fear Index, 1971-2026
Closing
President Nixon’s announcement 55 years ago to close the gold window has ushered in a volatile time period for global monetary systems, with frequent booms and busts. James Turk’s Fear Index remains a sound way to measure complacency and fear in the monetary system.
References
DISCLOSURES & INDEX DESCRIPTIONS
For disclosures and index definitions, please click here.
