The US Gold in Fort Knox is Secure, Gone, or Irrelevant

Gary Christenson - Deviant Investor

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.

 

More reading:

Charles Goyette                                The Dollar Anniversary

Investment Research Dynamics        Despite Obvious Fed Intervention

Paul Craig Roberts                           The Entire US Gold Hoard is Gone

GE Christenson

The Deviant Investor

 

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12 thoughts on “The US Gold in Fort Knox is Secure, Gone, or Irrelevant

  1. If an audit were to be done, there would be those who refuse to believe it. They would question the validity of the audit. Show a photograph of the gold, and they’d swear it was Photoshopped. Walk them through the gold, and they’d insist it was lead with gold-colored paint. To the Donald Trumps of the world, no amount of evidence will disprove their null hypothesis.

    However, that said, the original point remains valid. I fully expect inflation over the next decade to get pretty bad and to remain bad long enough for the budget to become balanced right in the middle of an economic crisis.



  2. As an Inspector for the Boeing Company I used an eddy current machine to measure plating thickness, usually in the .0003″ range. The same concept machine that operates in the 3.0000″ range could detect tungsten inside a gold bar in a non-invasive, ten-minute exam. So the extent of pilferage is knowable and quite possibly known.


  3. The gold isn’t “gone”. It is still out there, owned by someone. It doesn’t matter if it is still owned by the US government or if it is owned by somebody else who the US government has sold that gold to. The gold is still out there, in the global supply, and available for the right price.

    So, when making investment decisions, it is indeed totally irrelevant whether there is still gold in For Knox or not.


    • Perhaps in the short term in some limited circumstances this might be true. But, as the truth is slowly revealed it will impact the consciousness of people – it always does. And in realizing that much or all of the supposed 260,000,000 oz are gone and that many lies have been told, people will be more interested in possessing gold and real assets and less interested in paper and lies. And that will drive the price up.

      The truth is seldom irrelevant. It may take time to impact the consciousness of the nation and world, but it will.

      And what happens if the dollar crashes and then it is announced that to stabilize the dollar, it will henceforth be backed by gold. Do you think a few people will want to inspect the gold? I do. The truth is seldom irrelevant.
      The Deviant Investor


    • Gold is Gold and paper is paper, in the end Gold will retain all value of the printed paper that is that is left in the system. The value of Gold(Silver) will seek that equlibrium and be worth multibles of today’s value. It will be stunning!!!



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