Gold Clause Law and Legal Definition

According to 31 USCS § 5118, gold clause means a provision in or related to an obligation alleging to give the obligee a right to require payment in gold; a particular U.S. coin or currency; or the U.S. money measured in gold or a particular U.S. coin or currency.

A gold clause allows a creditor the option to receive payment in gold or something equivalent to gold. A gold clause will be helpful to a creditor in long term contracts.

The main reasons for adding a gold clause within a contract are the concerns of the creditor in matters of inflation, war, changes in government, and any other uncertainty about the future value of currency. These clauses were common at the beginning of the twentieth century. Although their use in the U.S. was invalidated by the Gold Reserve Act of 1934, later Congress reinstated their use for obligations issued after 1977 in accordance with 31 U.S.C. § 5118.