Credibility of the US Bullion Depository and the Possible Price of Gold

Posted by Przemyslaw Radomski

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News Item: German Bundesbank To Repatriate Gold From New York Fed –  Despite previously characterizing the idea that it was planning on moving gold out of the New York Fed as an “irrational fear,” the German Bundesbank is set to announce a huge repatriation of its bullion this week, with France also being emptied of Germangold in a sign that trust between central banks has hit rock bottom

The last audit of Fort Knox’s gold was in 1953, and it was hardly comprehensive. No outside experts were allowed, and only about 5% of the gold was tested. There was no bar count, weighing or conventional assaying. It’s surprising that no inspection has been made in 60 years, since large entities listed on stock exchanges are usually required to undergo an outside audit at least annually.


One of the first accounts claiming there was no gold in Fort Knox appeared in 1974. The writer, Louise Auchincloss Boyer, secretary to Nelson Rockefeller, fell out of her New York apartment window and died three days after publication of the article. The incident resulted in an investigation; in September 1974, six Congressmen, one Senator and the press toured Fort Knox; there was gold, but only a fraction of it was available to see.

Last year, Germany ordered an audit of its gold reserves stored abroad. It had never before conducted a comprehensive audit of its foreign gold reserves.

This suggests that Germany has doubts about the US government’s gold storage practices. It’s hardly conceivable that there is no gold left in Fort Knox or the New York vault; 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, and audits acknowledging the existence of gold based on seals that were not broken, not on the actual count and examination of bars.

What does this mean with respect to the gold price and a dollar collapse? If the value of the greenback is reduced to paper, gold could appreciate to $5,000 or to $10,000 (in today’s dollars). Nobody really knows. The point is that if doubts about the amount of gold stored in Fort Knox are just that – doubts – gold could be a lot more expensive than it is today. If, however, there’s any substance to the rumours that gold reserves in Fort Knox are lower than officially reported, a gold price of $6,000 could be the lower end of where it might go.

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