jmherbenerForeign governments, especially the French, began to redeem dollars for gold. They could take $35 and redeem it at the Treasury for an ounce of gold and then have an asset that was worth more than $35 in world markets. Gold was flowing out of the Treasury into the hands of foreign governments during the 1960s. Foreign governments realized that the Fed had inflated the dollar money stock to the point at which redemption of the dollar at $35 an ounce was becoming untenable.
Take a look at chart 14.1 in the publication below.
http://fraser.stlouisfed.org/docs/publications/bms/1941-1970/section14.pdf
It documents that the Treasury gold stock peaked in Jan. 1958 at $22,784 million and then started to steadily decline. By Dec. 1970 it stood at $10,732 million.
Here is Jacques Rueff’s account of the collapse of Bretton Woods. Rueff was an economic adviser to French president Charles de Gaulle.