by Andrew Tangel
August 2, 2012
The gold audit is a first for the
institution and includes drilling
into several hundred ingots.
It could put the conspiracy theories to
A stack of gold bars
stored at the Federal Reserve Bank of New York.
The Treasury Department
recently completed an audit of its gold there.
(Federal Reserve / August 3,
For decades, the U.S. government has stashed
gold five stories beneath Manhattan in a vault under
the Federal Reserve's
fortress near Wall Street.
Or has it?
Some conspiracy theorists suspect that the billions of dollars' worth of
bullion might have been looted in a dramatic heist, a la the movie "Die
Hard: With a Vengeance." Others claim that the gold has been used in a
shadowy government transaction, or swapped with gold-painted bars. It's even
caught the attention of politicians like Rep. Ron Paul and members of
Now all of us may finally get some answers.
The federal government has quietly been completing an audit of U.S. gold
stored at the New York Fed. The effort included drilling small holes in the
bars to test their purity.
The Treasury Department has refused to disclose what the audit has revealed
so far, saying the results will be announced by year's end.
But as one former top Fed official said
recently, the testing may finally prove that "Goldfinger didn't sneak in at
night" and take the gold.
"The calls for audits are saying, 'We don't
trust the government for the last 200 years,'" said Ted Truman, a former
assistant Treasury secretary and Fed official.
He called perennial questions about the
country's reserves "the gold bug equivalent of the birther movement."
The Treasury's auditing operation, including
drilling, is a first for the New York Fed.
The department's inspector general previously
audited and tested only gold it keeps under heavy guard at Ft. Knox, West
Point and the U.S. Mint in Denver. These three locations hold 95% of the
In New York, about $21 billion in U.S. gold is locked inside the Fed's
vault. It's stored alongside bullion from three dozen other countries and
organizations such as the International Monetary Fund. All told, about 23%
of the world's official gold reserves are stored in the central bank's
The audit, which began in January, took place 80 feet below the Fed's
limestone and sandstone Italian Renaissance building in Manhattan's
financial district. Visitors to the vault make their way through a steel and
concrete entrance where a 90-ton door rotates open.
Inside, a massive scale is ringed by 122 blue cages that hold about 530,000
gold bars - 34,021 of which belong to Uncle Sam. The auditing team counted
the U.S. stash, selecting more than 350 bars from which to extract samples
The process involved about half a dozen employees of the Mint, the Treasury
inspector general's office and the New York Fed. It was monitored by
employees of the Government Accountability Office, Congress' investigative
The bars were first weighed on a small electronic scale, then transferred to
a table mounted with a long, thin drill used to burrow into the gold, said a
person familiar with the operation who was not authorized to speak publicly.
Workers were careful to collect any stray gold bits, the source said. Based
on the market price of about $1,600 per troy ounce, the Treasury removed
more than $110,000 worth of gold samples.
A Mint spokesman said about 1 to 1.5 grams of each sample is destroyed in
the assaying process, with the remaining granules returned to the
The New York Fed refused to comment...
The final results still might not satisfy some. Paul, the Texas Republican
and presidential contender, wants an independent audit of all U.S. gold.
In 1981, when Paul was on the Gold Commission - a panel set up by Congress
to explore expanding gold's role in the U.S. monetary system - he argued for
full gold audits every year.
He has pitched legislation for an exhaustive
examination of the country's gold that could cost as much as $60 million.
"If the gold is there and everything is in
order, they should welcome an audit," Paul said in an interview.
He said he doesn't suspect that anyone has
replaced the gold bars with fakes.
He's more interested in examining paperwork that
would show whether the gold has been used in any transactions that were
never disclosed to the public, such as loans to other governments.
He is not alone. In Germany, there have been calls by some politicians to
"repatriate" the country's foreign gold reserves and return to a gold
standard as the euro common currency faces an uncertain future.
Germany owns the world's second-largest reserve of gold, much of it stored
in central banks in New York, London and Paris. The German government keeps
close tabs on its domestic gold reserves, but some in Germany are
questioning the security and safety of the bullion stored outside the
They've launched a campaign called Gold Action, supported by
politicians, economists and other German citizens, with the goal of bringing
the bars back home.
Philipp Missfelder, a prominent German legislator in the country's
ruling Christian Democratic Union party, visited the New York Fed in
February seeking to inspect his country's gold.
Missfelder was not given access to Germany's gold bars, though it's unclear
why, according to German magazine Der Spiegel. He declined to comment.
The New York Fed hasn't typically rolled out the red carpet to the central
banks and international organizations wanting to audit their gold accounts,
according to Ernest Patrikis.
He's a former New York Fed official who had
stints as the institution's general counsel and chief operating officer.
"They could come in and take a look," said
Patrikis, now an attorney in private practice in New York. But if they
wanted to count the gold, "you've got to take it away, count it and
bring it back."
America's central bank began taking foreign gold
deposits when it opened in 1924.
Gold piled into the New York Fed's vault during
World War II, as countries stored it there for safety. Foreign reserves
quadrupled to $4 billion worth of gold by the war's end, according to the
The gold vault swelled with bullion until 1971, when the U.S. stopped
backing dollars with gold. Since then, the Fed role as keeper of the yellow
metal now carries less significance.
These days the New York Fed focuses on more pressing roles:
implementing the country's monetary policy
by expanding or tightening the money supply.
It played a central role in propping up the
financial system in 2008.
Paul suggests that the government offload its gold reserves if they serve
"I would just as soon they sell the gold,"
Paul said. "And then we would find out if they really had it."