Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

How Much Gold Is Really in Fort Knox, and How Would the Answer Affect Gold Prices?

By

A look at the credibility of the US bullion depositary and the possible price of gold.

PrintPRINT
At first it may sound shocking, but the last audit of gold stored in Fort Knox took place in 1953. No typo here -- 1953, just after US President Dwight Eisenhower took office. Even though it is the last audit up to date, it can't be described as satisfying. No outside experts were allowed and the audit team tested only about 5% of gold hoarded in the fort. So, there hasn't been a comprehensive audit of Fort Knox in at least 60 years. This is at least surprising, given the fact that large entities listed on stock exchanges are usually required to undergo an outside audit at least once a year. Of course, the US Bullion Depository is no conventional company. Nonetheless, not auditing it independently for more than half of the century raises questions such as the one posted above.

This is not a new topic. One of the first written accounts questioning the amount of gold really stored in Fort Knox appeared in 1974 in a tabloid, the National Tattler. An unnamed informant claimed that there was no gold left in Fort Knox. The sensational nature of the story, and of the newspaper, wouldn't perhaps contribute to the credibility of the account, but it was later revealed that the informant, Louise Auchincloss Boyer, secretary to Nelson Rockefeller, had fallen out of the window of her New York apartment and died three days after the publication in the Tattler. The tragic incident resulted in controversies over the possibility that the US Bullion Depositary may have misstated the actual amount of gold held in Fort Knox. Congressman John R. Rarick demanded a Congressional investigation; on September 23, 1974, six Congressmen, one Senator, and the press were allowed to enter Fort Knox to see for themselves if the gold was there or not.

The tour showed that there was gold in Fort Knox -- but, all the same, it sparked even more controversies. Only a fraction of the gold reserves were available to see. A photo of one Congressman published by the Associated Press suggested that gold bars held in the fort may have been less heavy than would be usually expected.

Quite obviously, this has resulted in even more doubt about the fineness of gold in Fort Knox. None of these doubts have been put aside by any of the audits carried out since 1974. When the reserves were audited, the amount of the gold examined was fractional and there has been no comprehensive bar count and weighting. The same goes for assaying – if a fraction of gold bars were examined at all, then a fraction of this fraction were assayed. The methods used in the assaying process were not conventional. Usually, during an assay, gold bars are examined by means of drilling, which is called the core boring method. But the bars in Fort Knox were examined merely by cutting of small chips of the metal from their surface. This method only proved that the outer layer of the bars examined was made of gold.

This difference in assaying methods is important if you consider that counterfeit "gold bars" have been showing up in New York recently and that fake gold bars turned up in LBMA Approved Vaults in Hong Kong. All these bars had one common characteristic: they were made of tungsten, which has similar density as gold, and covered with a gold veneer. The problem here is that such bars can go undetected if they are examined with X-ray fluorescence scans or by means of simply scraping of a bit of the metal from the surface. So, to properly assess the fineness of gold bars in Fort Knox, a full core boring method should be employed.

In 2012, the German federal court ordered that the German central bank, Bundesbank, conduct an audit of German gold reserves stored abroad, particularly in the US, UK, and France. The German authorities have never before conducted a comprehensive audit of their foreign gold reserves and the last time they were able to see their gold stored in the New York Federal Reserve vaults was supposedly in 1979/1980. The Bundesbank has expressed that it doesn't doubt the trustworthiness of the US authorities, but demands stricter control over its gold reserves. Because of that, 150 tons of gold will be shipped from the US to Germany to assess the fineness of the bars.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE