U.S. Mint Releases Fort Knox Audit
One of the most sensitive secrets protected by the Washington establishment—more so than its surveillance programs, its nuclear arsenal, or even Area 51—is the massive cache of gold reserves held at the federal depository in Fort Knox, Kentucky.
Locked Up Tighter Than Fort Knox
According to official statistics, the United States holds far and away the largest gold reserves of any sovereign nation of supranational institution. The government supposedly maintains over 8,100 metric tonnes of the yellow metal in its reserves, spread out across three main bullion depositories. (For reference, the second-largest gold reserves owned by Germany total less than half of the U.S. stockpile.)
In addition to facilities in West Point, New York and Denver, Colorado, the Fort Knox facility—known as the U.S. Bullion Depository—stands out for its reputation as an impenetrable fortress. More than half of the total reserves—4,582.95 tonnes, or 147,341,870.463 fine troy ounces of gold—are kept at Fort Knox, while more than 1,000 tonnes are stored at West Point and Denver each.
Cleverly located at the intersection of Gold Vault Road and Bullion Boulevard, the bullion depository at Fort Knox was constructed and housing the growing government stock of gold by 1937. Much of this newfound gold came into the government coffers as a result of President Franklin Roosevelt's executive order confiscating privately held gold in 1933. Following the Second World War, with the United States emerging as the lone remaining superpower, the country's gold holdings reached as high as 20,000 tonnes!
The Fort Knox facility's reputation is thanks to its world-renowned system of security measures, from countless cameras to U.S. Mint Police guards, military helicopters, land mines, fences of barbed and electric wire, and a virtually impregnable vault door. At various times, it has been used to store other valuable items, such as the Declaration of Independence, one of the four copies of the Magna Carta, or the crown jewels of foreign nations.
Given all the protection, it seems obvious that billions of dollars worth of gold—or something—indeed resides at Fort Knox. However, there has been considerable doubt over the years as to whether the depository actually held any gold. This is largely due to a well-circulated rumor during the 1970s that the vaults had been emptied by elites in banking in government, either leased out or confiscated. If you subscribe to this theory, the incredible amount of protection at the U.S. Bullion Depository is for little more than a pile of IOUs.
Although this rumor or theory is simply that, the remarkably high security that guards the U.S. gold reserves has understandably drawn the curiosity of the investigative press. The speculation has also been amplified by the degree of secrecy surrounding the reserves: Since the depository opened seven decades ago, the only time any member of the public has been permitted inside the facility was when members of the media were (however briefly) invited in on September 23rd, 1974. No photographs were allowed, of course.
Digging for the Truth
Determined to uncover more about the bullion stockpile, BullionStar's Koos Jansen submitted a number of Freedom of Information Act (FOIA) requests to the U.S. Mint. He attempted to pinpoint how the Treasury Department verifies that the gold in its vault is both present and real.
Jansen is a longtime gold insider and journalist reporting on, for example, the goings-on of the incipient Shanghai Gold Exchange (SGE). His analysis has helped fill in the gaps about how much gold is passing into China each year, which is treated tantamount to a state secret by the People's Republic.
Koos is in the company of monetary scholar Jim Rickards and former U.S. Representative Ron Paul in publicly campaigning for more transparency in the financial system and the gold market. This effort to audit the Fort Knox gold, the Federal Reserve, and its policies toward gold is now carried on by the younger Paul, Rand, who currently serves as a U.S. Senator from Kentucky—where Fort Knox is located.
Not only were Koos's requests met with a reluctant response from government officials, but the mint claimed it would have to spend countless labor hours searching through dozens of boxes for hundreds of pages that might be what Koos was looking for: the annual gold audit records that were carried out between 1993 and 2008. Bear in mind that another FOIA request for internal email correspondence relating to the initial inquiries revealed that the official who provided this exaggerated estimate of how difficult the task of producing the documents would be was an auditor himself and among the authors of the documents that Jansen sought in the first place! He ought to have known precisely how many pages were needed and presumably where to find them.
Ultimately, the mint concluded that Koos would need to pay over $3,000 in order to have the documents gathered and copied. While this sum is unreasonable, a crowdfunding campaign donated the total in less than 24 hours. (Strangely enough, the mint never actually cashed Koos's check, and nearly all of the money was eventually refunded.)
When the mint finally produced the audit documentation, Jansen received 134 lightly redacted pages (rather than the estimated total of 1,200 pages). Moreover, it showed a number of (at best) inconsistencies in how the mint conducts its bullion inspection for auditing purposes. Here is a rundown of some of Koos's key findings.
Multiple Inconsistencies Cause Skepticism
The U.S. gold reserves at Fort Knox are broken into different numbered compartments within the gold vault. The gold stored in these compartments would get moved around if samples were taken for assaying during the audit. However, in some instances, the rationale for moving gold from one compartment to another proved elusive. One particular compartment with 19,800 gold bars was recorded as being moved in the 1996 audit, yet was checked again in 1998 (with the same 19,800 gold bars) with no reference to the fact that this is almost certainly the same sample of gold inspected two years prior. One wonders: was this a simple oversight or some kind of conscious obfuscation effort?
Several more examples of these blurry situations are shown in the released documents. Since there are far too many gold bars to count at once, the audit is carried out piecemeal and only small samples are taken for assaying. By and large, the vast majority of the verification is done by checking Official Joint Seals. This is basically an affirmation that the bullion was up to snuff at the last audit, and has been sealed since. Theoretically, if the seal hasn't been tampered with, this is as good as verifying the metals themselves. It saves time and labor costs.
However, how trustworthy is this system of accounting? Koos's analysis of the procedures used found its rigor wanting in several key areas. For instance, sample sizes used for assaying were conspicuously small. Compared to the samples taken in the 1950s and 1960s, the standards for the integrity of the sample size had fallen sharply.
Other problems sound laughable in their incompetence. Scales at the mint used to weigh the bars often didn't work properly. In one case, the auditors were allegedly unaware that the scale was showing standard ounces rather than troy ounces, which all precious metals are weighed in, throwing an entire day's worth of measurements out of whack. (That a scale used for precious metals would ever be set to anything besides troy ounces is questionable.) In another dubious mix-up, a number of measurements were faulty because the auditors misread where the decimal point was on the scale. Why might the government entrust such inexperienced employees with this important task?
Jansen found instances in which the Treasury's auditors failed to follow the government's own procedures for the auditing process. It was obvious that some of the records were missing (or not provided). On top of this, a decade's worth (1993-2003) of Joint Seal inspections from the Denver and West Point depositories are not accounted for. In short, this all sounds like the audit process has a number of cracks through which accounting mistakes can easily slip through.
Koos takes a sharp jab at how the government bureaucracy operates, inveighing (with cause) "it should be clear that the Deep Storage gold has not been audited by professionals, but the precious metals have been verified by imbeciles."
What his dogged FOIA requests have failed to reveal, unfortunately, is anything that would put the questions about the Fort Knox gold to rest.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.