Does Not Compute: Audits Of U.S. Gold Severely Lack Credibility

“This is a story about misconduct, deceit, inconsistencies, and loose ends. At risk is the safety of the gold meant to underpin the…”

by Koos Jansen of BullionStar

According to the United States Treasury its 261 million ounces (± 8,100 tonnes) in official gold reserves are fully audited and accounted for. Because for many decades rumours are making rounds this gold has been covertly sold, in this essay we’ll thoroughly scrutinise the audits – indirectly evaluating the accuracy of the gold claims by the Treasury. What we’ll encounter is a wide range of problems in the audit documentation obtained through Freedom of Information Act requests submitted at the US government. Among other problems, since inspections commenced at Fort Knox in 1974:

  • Most physically verified and sealed vault compartments have been re-opened, for which the auditor can provide no valid explanation.
  • Auditing personnel has proven to be utterly incompetent and did not follow the auditing policies and procedures.
  • Repeatedly metal has been excluded from verifications.
  • Many of the audit and assay documents have been destroyed.
  • The US government goes to great lengths in withholding information and spreading false information.

In conclusion, the audits have been executed with an inadequate degree of integrity.

The heart of this investigation are the sealed compartments that store the vast majority of the US’ official gold reserves. These compartments are located inside the vault rooms of three US Mint repositories; Denver, Fort Knox and West-Point. In the early 1970s when it was decided all the gold was to be physically verified, the protocol was designed to open, audit, close and seal all compartments once, in order to avoid the necessity to repeat these procedures. Despite these rules, my research points out nearly all compartments have been re-opened after being audited. These revelations prompt strong skepticism about the credibility of the audits. Possibly, up to 200 million ounces (± 6,200 tonnes) of gold, approximately 75 percent of the total, have inadvertently been exposed to external threats.

What follows is an extensive dossier with most of the information in my possession about the audits, accompanied by a critical analysis hereof.

This is a story about misconduct, deceit, inconsistencies, and loose ends. At risk is the safety of the gold meant to underpin the world reserve currency.

Table of contents:

  1. Introduction
  2. The audits of US monetary gold
  3. Problems regarding the audits
  4. Conclusion
  5. Appendix

1. Introduction

Hardly anybody in the world of finance is aware of the audits of the US’ official gold reserves. On February 11, 2017, the Financial Times wrote, ‘much of the world’s excavated gold is thought to be in Fort Knox, but nobody can be sure, since the US government will not allow the auditors in’. Printed in other media, even the most seasoned gold analysts assess that the gold has never been audited. This is not a subject only the mainstream media is oblivious about, it seems everyone is. Our first observation is that the US government has not been willing to openly discuss the inspections, let alone flaunt with the results.

I became aware of the audits through the congressional hearing of The Gold Transparency Act (not enacted) that was initiated by Ron Paul in 2011. Through the hearing I learned that currently the Department of the Treasury’s Office of Inspector General (OIG) and KPMG are responsible for the audits of the US’ monetary gold. Eric M. Thorson representing the OIG attended the hearing and testified under oath it had completed all of its auditing duties by 2008.

Before we dive into the analysis and address the problems regarding the audits, first we’ll need to lay out the foundation by establishing what part of the US’ monetary gold stock is stored where and has been audited by whom.

In December 2017, the US’ official gold reserves accounted for 261,498,926 fine troy ounces (8,134 metric tonnes) all lawfully owned by the US Treasury – though the real owners are the American people. The majority of the total, 248,046,116 troy ounces (7,715 tonnes), is being safeguarded by the US Mint, the remaining 13,452,811 ounces (418 tonnes) are stored at the Federal Reserve Bank of New York (FRBNY).

The gold held at the Mint, in turn, can be divided in two segments: 245,262,897 ounces (7,629 tonnes) in Deep Storage gold and 2,783,219 ounces (87 tonnes) in Working Stock.

My investigation is primarily focused on Deep Storage metal, which are assets owned by the Treasury and kept under Official Joint Seal (OJS) at the US Mint. Currently in use are three Mint depositories. An aggregated 43,853,707 ounces (1,364 tonnes) are carried in 16 sealed compartments at the Denver depository, 147,341,858 ounces (4,583 tonnes) are harboured in 15 sealed compartments at Fort Knox, and 54,067,331 ounces (1,682 tonnes) are stored in 11 sealed compartments at West Point.

Deep Storage Assets. Deep Storage Assets are those assets owned by the Department of the Treasury and stored under OJS at the United States Mint. These assets are reported as Custodial Assets in the United States Mint’s annual Financial Statements.

Exhibit 1. Source.

The Working Stock in bars, blanks, and finished coins is stored predominantly at West-Point but outside sealed compartments.

Exhibit 2. Source. For a detailed overview on how much bullion and coins is located at what depository in the US in 2017, I’ve uploaded an excel sheet to be viewed and downloaded from here. For a more precise sheet from 2001, which includes the disposition of the Working Stock at the time, click here (source). Since 2001 the Deep Storage gold has remained flat, the Working Stock has slightly declined. The bar list of the Deep Storage gold in an excel sheet can be downloaded from here, for the bar list of the US’ gold at the FRBNY in PDF form see this document starting at page 128.

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