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The US Gold In Fort Knox Is Secure, Gone, Or Irrelevant

Market Analyst, Author, and Founder of The Deviant Investor
August 19, 2014

In 1950 the US owned about 20,000 metric tons of gold – approximately 640,000,000 troy ounces.  By August 15, 1971 when President Nixon “temporarily” closed the “gold window” that hoard had decreased to about 8,100 tons (Fort Knox, the NY Fed, and other locations).  The US government had been overspending, exporting dollars oversees, and other governments had “cashed in” those dollars for gold.  At that rate of decrease, the US gold hoard would have been entirely dissipated by now.  Perhaps it is gone!

President Nixon had a choice – default on the US promise to redeem dollars with gold, or reduce spending.  Like any prominent politician he chose to continue spending and to blame the problem on someone else – the “international money speculators” but it might as well have been the Russians, Democrats, the French, Communists, an ethnic group, or the weather – anyone but those responsible – The President, Congress, and the bankers.

Forty three years later (since August 15, 1971) the “temporary” policy is still in place, the US government has officially redeemed no dollars for gold, and the US economy has deteriorated.

Category                        1971                                         2014

National Debt (6/30)              $398 Billion                                    $17,600 Billion

Nat. Debt Increase/yr             $27 Billion                                      $894 billion

Middle Class                          Doing okay                                     Poorer

Fort Knox Gold                      Audited 1950s                               Audited 1950s

Option One:  Assume all the US gold is still in the vaults and unencumbered.

1)  An audit would dispel considerable concern and increase the credibility of the Federal Reserve, Wall Street, and the US government.  Congress should demand an audit (and that is as likely as flying pigs, Middle East peace, and Wall Street donating their 2013 bonuses to charity).

2)  The US national debt is approximately $17.6 Trillion – about fifty times the current market value of the US gold.  Clearly selling all the US gold would not fix the insolvency or debt problems of the US government. 

3)  Hint:  This option is not viable.

Option Two:  Assume all the US gold is still in the vaults but leased or hypothecated once or perhaps many times.

4)  Don’t expect anyone at the Fed or the Treasury to admit leasing or hypothecation.

5)  However an audit would still improve the credibility of the Fed, the Treasury, and the US government.  Probably not going to happen…

6)  This option, that the US gold remains in the vaults, seems unlikely but remotely possible.

Option Three:  Assume almost all the US gold is gone – leased, sold, lost, stolen, whatever.

7)  There is nothing for the Fed or the US government to gain and much to lose by admitting the truth.  Hence the truth will not be forthcoming.

8)  Don’t expect anyone to be indicted or prosecuted.

9)             Massive theft and the resulting cover-ups do not sound unlikely or impossible, especially after the revelation of multiple other scandals and thefts.

10)  The sale of millions of ounces of gold into the market over the past two decades certainly helped control the rising price of gold and helped mitigate the weakening of paper currencies.

11)  Option three makes the most sense to me.  It probably can’t be proven, but it is plausible that central bankers and government officials have chosen this option.

Does The US Gold Really Matter?

The US government spends roughly $3.5 Trillion per year and adds nearly $1 Trillion each year to the national debt.  The official 260,000,000 ounces of gold are currently valued at about $340 Billion.  The President and Congress would burn through the market value of that gold in slightly more than a month.

The Federal Reserve has “printed” well over $3,000,000,000,000 since the financial crisis of 2008 – about ten times the current market value of all the gold that the US supposedly still has in its vaults.  Global annual gold production is about 2,500 tons, about 80,000,000 ounces or about $105,000,000,000.  One hundred five billion dollars in global gold production is produced through the considerable efforts of the global gold mining community.  But the Fed chose to “crank up the printing presses” and effortlessly created over $3 Trillion in new digital dollars since 2008.  The Fed has temporarily saved the banks, the US credit rating, the bond market, the S&P 500 Index, and the upper 1%, and will continue to do so for as long as they can sell the recovery story to manage the crisis.

All the US gold, when priced in current dollars, seems rather unimportant in relation to the QE1, QE2, QE3, QE to Infinity, and “print or die” economics.  The crystal clear implication is that the market price of gold is undervalued and the dollars, yen, pounds, and euros are considerably overvalued.  That realization has not reached mainstream media, but it will eventually become common knowledge.

I assume that from the perspective of the Federal Reserve, all the US gold is merely a legacy asset with minimal significance.  And since the US gold has little or no significance, then it seems likely the gold has not been preserved, and that there is no benefit to the Treasury, The Fed, Wall Street, or the US government in performing an audit, admitting or denying gold leasing, or even discussing the subject.  Business as usual…

The Fed recently refused to allow Germany to inspect their gold which supposedly had been safely stored in the NY Fed vaults for several decades.  Clearly, the implication is that the German gold is also gone, there is much wrongdoing to conceal, and telling the whole truth is not a viable option.  Business as usual…

Bottom line:  In my opinion the US gold is largely gone and probably the gold supposedly stored at the NY Fed for other countries is also mostly gone.  Sadly, it matters to very few people, and the world will continue to print many more paper and digital dollars, euros, pounds, and yen.  Long live the value of paper, or so we should hope, since the inevitable reckoning and proper valuation of all paper assets, when it occurs, will be ugly, distressing, and dangerous.

The game won’t last forever, but governments and central bankers will do whatever it takes to maintain the illusion of the solvency of paper assets, the status quo, the global bond bubble, and the global currencies bubbles.


GE Christenson

The Deviant Investor

Gary ChristensonGary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy and central banking.

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