How much gold is actually in Fort Knox?

Some of You might remember hearing about JP Morgan and its naked short regarding silver. The media for the most part ignored this, and what little investigation that there was into them manipulating silver has gone nowhere fast. (here`s an old article from one of the only outlets that reported this)
http://www.nypost.com/p/news/business/feds_probing_jpmorgan_trades_in_gZzMvWBqOJpB55M7Rh9vwM

Some theorists think that JP Morgan has next to nothing in its vaults and has been charging people storage fees for phantom PMs.

This brings me to an old question that has been pondered for decades......How much gold is in Fort Knox? It has not been legitimately audited since the Eisenhower administration. I have heard many rumors regarding Fort Knox, including theories that there may be tons of gold PLATED bars masquerading as the real thing. What do You guys think?

 

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According to Wiki there is 4,603 tons of gold in Fort Knox but I really doubt that's true. Who really knows? Unless someone on this forum works there and goes in the vaults all the time nobody would know. Except of course the Gov't and we really can't trust that they would be truthful, could we??!

http://en.wikipedia.org/wiki/United_States_Bullion_Depository

 

I know everyone wants to believe there isn't any gold in Fort Knox. But until proven otherwise, it is probably safest to assume that it contains the reported amount. And that brings up the question of who cares and why does anybody think it is important?

Regarding JP Morgan's silver position, a lot of people assume they are naked shorts. However, one of JP Morgan's largest clients is the government of China, which has enormous silver reserves. It is possible that JP Morgan is just basis trading in the silver market to earn income on the metal holdings for their client, and that their entire short position is fully backed by silver. It is dangerous to assume they are "naked." Basis trading doesn't require delivery of silver and is entirely safe.

 

Because the Federal Reserve, lists 8,962 tons of gold on it's balance sheet as collateral for the federal reserve notes that it issues. This gold is actually in the form of US gold certificates which is backed by the physical gold in Ft. Knox. If that gold was found not to be there, the resulting confidence in the dollar as a reserve currency would be shaken to it's roots.

 

If it was found that the gold was gone, the gold certificates will just be replaced with Treasury securities and nobody would notice or care. Nobody cared when the Fed sold Treasuries and bought junk assets with little to no value to replace them to back the currency, and nobody will care about this either. It would only matter if Federal Reserve Notes were convertible into gold, and they aren't.

 

Two years ago I would have agreed with You. Now however, there is more unrest with the U.S.`s debt holders. China has made comments about selling Our treasuries should We decide to further tax their imports. (As Geithner has hinted at recently) Japan has also expressed hesitancy regarding buying more of Our debt, as the dollar continues to slowly diminish. (Japan is hurting as well)

I think the U.S. is slowly becoming a paper tiger in the global economy. Countries are no longer as dependent on the U.S. like they used to be. If it was found that there was not that much gold left in Fort Knox, I think the implications would be more of a "reputation killer" so to speak on a global scale. It would further deter other countries from taking on more of Our debt.

 

About $180 billion at today's prices. Compare that to the money supply, the budget deficit, the trade deficit, or the national debt. Any impact it has is psychological.

 

I have the feeling that there may be much more than the 9000 tons reported. I believe the US government has acted a lot like DeBeers has with diamonds. The US is a very large producer of Gold. If gold were not hoarded the price could easily fall dramatically. That would devalue the Gold that backs our currency. I know, we have Federal Reserve notes, but faith in our dollar is created by hard currency backing (Gold). It would not be in the interest of our system to release how much we actually have, especially if it exceeds a certain threshold. IMHO

 

Indeed. The dollar is the world's reserve country because the the rest of the world expects the USA to be stable and up front on how the dollar is managed. If the USA is lying about the gold, which is exactly what putting the gold that doesn't exist on a balance sheet means, then it will shake the trust in the other things the USA says it does and this will crush the $ immediately. This is also presumed to be the largest gold deposit in the world and it's disappearance would cause enormous difficulties in the world's finance sector and it would cause disruptions in things such as the oil market. All in all, a big pile of not good.

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This is an opinion not backed by any official policy nor an understanding of the use of gold in the central banking system. If you had already decided that gold is meaningless, then why bother to ask the question? One more time, central banks don't use the confetti money they produce to settle payments amongst each other. They have to use real assets backed by real collateral and gold is is one of the universal accepted currencies accepted for this purpose. If it was meaningless, then other central banks would not be holding gold, buying gold and using it to settle payments, (as the BIS did last month with a massive transfer of gold).

If it didn't matter, then they should open up Ft. Knox for public tours and charge admission.

 

You are correct that my comment isn't backed by any policy. It's backed by what happens in the real world. In the past year, the Fed has decided to back FRNs with nearly worthless bank assets that they traded Treasuries to obtain. Nothing changed. In the best of times, FRNs are backed by Treasury debt that is denominated in FRNs; a circular argument that defies logic -- except that it works. But the reality is that nobody cares. FRNs are not convertible into any hard assets.

If you really believe what you say, you should get rid of all of your dollar denominated assets.

Edit: I would also add that you are wrong in thinking that central banks use gold to settle payments among each other. This hasn't happened for many decades.

 

You are correct that a lot has changed in two years, and if the gold wasn't there, it would be one more ding to the reputation of the US government. But any country who wishes to run a trade surplus, and there are many still wedded to this mercantilist policy, they have no choice other than to accept US Treasury debt or buy US good, services, and assets to balance the transaction. Of course, a country like China always has the option of not accepting more Treasury debt, but the other side of the coin is that they would, by necessity, have to self-limit their exports to the US to a currency value equal to what they buy from the US. That's just the way the system works.

 

Dear Heart I never said they were convertible nor implied it. You apparently don't understand the reason as to why the Federal Reserve holds the Ft. Knox gold as collateral for it's operations and the discussion goes well beyond this topic so I won't start. You asked who cares and why does it matter. You now have your answer whether you choose to believe it or not.

If nobody cares and it doesn't matter, then the USA is spending a hell of a lot of money to protect something that doesn't matter, and the Federal Reserve conducts daily operations based on the gold on it's balance sheet. The Treasury, the Army, the Federal Reserve, etc are not going to be doing this for "something that doesn't matter and which nobody cares about". This isn't circular logic, it's plain illogical.

 

To the OP... I do not know.

What I will say is all FIAT since its inception has collapsed under its own weight.
The USofA was founded in 1776 while the FRN was issued in 1914 and has lost 90% of its value since.

Gold in Fort Knox to my understanding was handed over to the Fed Reserve once 28 signed the 'act' into law. The question I have is, who’s gold is it?

IMO... it doesn't matter neither you nor I can go to Ft. Knox... knock on the door and say, I want to make a citizens withdrawal.
So, I will continue to convert into bullion and make the numismatic purchase as I see fit

 

I want to correct your errors, not because I think I can convince you, but to protect others. You said, "One more time, central banks don't use the confetti money they produce to settle payments amongst each other. They have to use real assets backed by real collateral and gold is is one of the universal accepted currencies accepted for this purpose. " This is definitely implying that gold is used to settle payments between central banks, just as I quoted you saying. The second error is in stating that the Fed owns the gold in Fort Knox. Fort Knox is the US government gold depository and the gold is owned by the Federal Government and can be used any way they see fit. It is not available for use by the Federal Reserve as a monetary reserve, which keeps a lot of the gold they own in the basement vault of the New York Federal Reserve building and other locations. Gold doesn't matter in the sense that the currency is neither backed by nor convertible into gold. This doesn't mean it isn't an asset of the US government [and everyone else who holds it], and is therefore secured. You need to do a lot of research on this subject before earning the right to make pejorative comments to others making factual statements.

http://www.fms.treas.gov/gold/current.html

 

There was recent news that the US took a couple hundred tons of gold from the IMF for some paper money at $850 an ounce or so.
Guess they still run the show
and china is committed to our debt they can never stop buying it!!!
Hehe what a bunch of suckers the rest of the world is.

 

No it doesn't imply this, but I will be patient and repeat what I posted above in more simple terms. Central banks do not use the fiat money they produce to settle obligations with other central banks. The analogy is this. Company A produces bolts, Company B produces steel. Company A buys steel from Company B to make the bolts. Company A does not settle the account with Company B with the bolts it produces. Likewise the Federal Reserve produces fiat dollars. It does not pay it's own obligations with these fiat dollars. It's vastly more complicated than this, but hopefully this simplification is enough for you. Therefore, this is not a statement that fiat dollars are convertable into gold.

Second point. The US government owns the gold in Ft. Knox. This I stated above which you also seem to missed. What I said was that the Federal Reserve has gold certificates issued by the federal government that is backed by the gold in Ft. Knox. It's posted above and plainly there for anyone willing to see it. You also said that because the federal government owns the gold it is free to do anything with it as it sees fit. Exactly. FDR sold this gold to the Federal Reserve at $35/ounce in return for the FRNs that he then used to fund his programs in the 1930s. This is why the Federal Reserve has those certificates.

So in summary. You asked two questions. (though I realize rhetorically) Who cares about the gold in Ft. Knox and why does it matter. Obviously the Army that has 1000s of troops stationed there to protect this gold, the President who is the head of the Army, the Congress which provides the funding and the Federal Reserve which is holding gold certificates that are backed by this very gold. And because the Federal Reserve counts this gold as collateral for it's operations, then anyone who uses the Federal Reserve's product, as a reserve, is also very concerned they are truthful in their stated operations.

Your question was thoroughly answered.

 

On the Federal Reserve web site, their balance sheet lists as an asset gold receipts for about 260 million ounces, acquired from the Treasury at $42/oz. http://www.federalreserve.gov/monetarypolicy/bst_table10popup.htm :

Now, that's not the clearest thing in the world to non-experts, and I reserve the right to have misunderstood it. "$11 billion" is what the value would be at $42/oz. Finding this out kind of surprised me. When I first heard about it it sounded like another piece of loudmouth nonsense, to be filed with "tungsten" and "100:1 leverage".

 

I don’t think you can squirm out of this with derogatory comments. You said, “the Federal Reserve holds the Ft. Knox gold as collateral for it's operations…” This isn’t true. You said that if it was found that there was no gold in Ft. Knox, the confidence in the dollar would be “shaken to its roots,” and that isn’t true. You said, “Central banks do not use the fiat money they produce to settle obligations with other central banks.” Nobody on the planet thinks central banks exchange paper. So what are you saying? This is a meaningless statement probably intended to cover up your prior error by saying the whole thing is too complicated to explain. Maybe you meant to explain how the Fed buys and sells foreign currencies through the FOMC and in coordination with other central banks. Or that they also use currency swaps and lines of credit established between central banks. Maybe. Gold isn’t used as a backing for currency or for international settlements. Some banks hold gold, some don’t. It just isn’t important to the vast majority of dollar holders. The Fed can back the dollar with gold, or with nothing, and it doesn’t matter. The dollar has value because it can be used to purchase goods, services and assets in the US, and not because it is “backed” by anything.

I don’t care what you believe. I just don’t want you to mislead others.

 

You are correct that it isn't very clear. It gives the illusion of ownership, but comes with restrictions. The gold certificates can't be redeemed in gold bullion. They can't be sold to individuals or to other central banks. They can only be traded from one Fed regional bank to another. The Treasury can extinguish the certificates by an act of Congress and replace them with US Treasury debt. So the question remains, is this what gives the dollar its value? I think it is clear that it is not. So it doesn't matter whether the gold is in Fort Knox or not.

You did an excellent job at researching this.

 

Thank you, CS, but clearly not excellent enough given that I didn't find out about the restrictions you mentioned. Where can I read more?