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
All of this shows that the measures applied by the US government to gold storage in Fort Knox and the Federal Reserve Bank of New York's vaults are questionable and that this fact may have been recognized by German authorities. It's hardly conceivable that there is no gold left in Fort Knox or the New York vaults. On the other hand, the lack of a comprehensive audit of either facility is unnerving. So are other irregularities associated with Fort Knox: missing shipments, audits acknowledging the existence of gold based on seals that were not broken, not on the actual count, and examination of bars and so on.

Of course, a full audit of Fort Knox wouldn't be an easy task because of the sheer amount of gold to be examined. But it's feasible. The US Mint estimated the cost of such an audit to stand at $60 million. The Treasury came up with a lower estimate – $15 million. Even if we take the higher value, and compare it to the value of gold stored in Fort Knox (as of December 31, 2012, $240.8 billion) it adds up to about 0.02% of these reserves. In this light the Treasury cannot really claim that this is too expensive.

So, what does all of this mean for the analysis we presented in our essay on gold and the dollar collapse? In short words, not much. Our price target for gold is to be treated as a general indication of where gold might go if the dollar collapses. If the value of the greenback is reduced to paper, we would expect gold to appreciate, but not exactly to $6,179.61. It could appreciate to $5,000 or to $10,000 (in today's dollars). Nobody really knows that. The point is that if doubts about the amount of gold stored in Fort Knox are just that – unproven doubts – gold could be a lot more expensive (in dollar terms) than it is today. If, however, there's any substance in these doubts and gold reserves in Fort Knox are lower than officially reported, gold could go even higher, and the price of $6,000 per ounce of gold could be viewed as the lower bound of where it might go.

The bottom line is that if the dollar collapses and the gold reported to be in Fort Knox is really there, gold could appreciate very strongly. If the dollar crashes and Fort Knox is (partially) empty, gold could go sky-high (in dollar terms).

For more information on how to structure your gold and silver portfolio to deal with both the possibility of the dollar collapsing and the possibility that it will endure in spite of the current US debt levels, please consult our essay on gold and silver portfolios. For information on why we use past gold tops as reference points, check our essay on the 1980 top in gold.

Thank you for reading.

For the full version of this essay and more, visit Sunshine Profits' website.

Twitter: @SunshineProfits
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