Why Verifying Fort Knox Gold Is Crucial

Calls for a Fort Knox audit grow louder every day…

Bullion.Directory precious metals analysis 05 March, 2024
By Peter Reagan
Financial Market Strategist at Birch Gold Group

It’s not without reason that we have a gold hoard officially almost amounting to those of all other nations put together.

We’re supposed to be not only the global economic superpower, but one which achieved that status through sound money.

The very bedrock of our nation rests on using real money as money and nothing else. That’s straight out of the Constitution.

Actually, the U.S. dollar is supposed to be synonymous with gold and silver. We still have some of those in numismatics, where silver coins are often referred to as “silver dollar”. Only to then be called junk silver.

We have been careful and steady with our coverage of the idea that the U.S. might have leased out some or all of its gold, or even sold it.

This is a long-standing idea, but until recently, it was viewed as some far-out conspiracy theory by many. But doesn’t that stand true for a great many things, also?

As mentions and public discourse grew, so did our coverage. Now, in one week, we have mining.com doing a feature on it and Tucker Carlson delving deep into the issue:

There’s no denying that the idea has gone mainstream, relatively speaking. It is no longer on the fringes.

Senator Rand Paul requesting a formal audit on February 19 also tells us that.

However, the story takes an even more interesting turn as we go through the comments on the mining.com article.

There, it is suggested by many that instead of just leasing out our gold or selling it, we might be storing foreign-owned gold in the vaults of Fort Knox. (We already know this is true for the Federal Reserve Bank of New York’s vaults.)

Should an audit of Fort Knox actually happen, someone else’s gold could be trotted out as the U.S. gold reserve. Who could prove different?

It’s questions like these that show us that faith in the government’s management of both the U.S. economy and the dollar’s value might already be gone by the wayside.

We have moved so far away from real money that our own citizens would not trust the government’s (let alone a third party’s) claims that the U.S. bullion reserve’s vaults at Fort Knox are indeed full of gold.

“Trust me!” just isn’t good enough. And if you want to get really, really annoyed about this, spend a little time with the transcript of Dr. Ron Paul’s H.R. 1495 The Gold Reserve Transparency Act. (My favorite part was the discussion of the 261 million ounces of gold bullion pledged to the International Monetary Fund, but never transferred from Fort Knox, despite the fact that all bullion in the U.S. gold reserve is allegedly “unencumbered”…)

Fortunately, regular audits, random inspections and most importantly of all unencumbered, clear and definitive legal ownership of all the assets in a gold IRA are built into the system. There’s never been an incident involving a precious metals depository simply misplacing 216 million ounces of gold bullion.

the federal government, by their owners are a straightforward procedure, so all this concerns you only to an extent.

To the physical gold owner, worries about the U.S. dollar’s stability are mostly a nostalgic affair.

It is only those without physical gold exposure that feel the need to panic, perhaps with good reason, about the greenback’s admittedly dismal prospects.

South Korea limits delivery of gold and silver to banks – what’s going on?

Going 2 for 2 on the “we called it” stories, we recently mentioned how South Korea is seeing some turmoil that may or may not be related to gold.

The sharp uptrend in gold purchases, namely among younger investors, coincided or not with a brief declaration of martial law.

Countries that declare martial law on their citizens are usually the kinds of countries whose citizens pile into gold.

Back then, there wasn’t much more to go off of, and we speculated if this isn’t just reasonable interest.

But now we have a lot more. As gold prices soar and supply tightens, shortages of physical gold and silver bullion spread across Asia and Europe. Between February 12 and 14, the Korea Minting and Security Printing Corporation suspended sales of gold bars to banks. Then the Korea Gold Exchange suspended delivery of silver bars AND and completely ended sales of the popular 10 gram and 100 gram gold bars. Finally, the exchange notified the nation’s banks that 1 kilogram (32 troy oz) gold bars couldn’t be delivered.

How’s that for eventful? To make matters worse, their explanation is surprisingly thin. An unnamed official from a major Korean bank said:

“As gold prices recently hit record highs, a shortage of gold bars emerged. Consequently, investors turned to silver bars as an alternative, leading to a surge in demand for silver bars.”

A combination of profit-taking due to the high price of gold, and “buying too much” silver? Wait, a “shortage emerged,” based on what, exactly? Based on price? Any economist (actually any fifth-grader) can tell you that higher prices do not cause shortages! Rather, shortages cause higher prices.

Probably what really happened is that a big number of commodities traders decided they weren’t content speculating on gold price movements and demanded physical delivery. When your commodities contracts are leveraged 96:1, it doesn’t take too many physical deliveries to drain the liquidity (let alone the actual gold!) right out of the system.

You’ll remember that London currently has a similar issue, blamed on deliveries to New York.

We dismissed the idea of this being caused by the possibility of Trump putting tariffs on gold, calling it mostly nonsensical, and suggested there are deeper factors in play.

I can assure you that the average South Korean isn’t obsessed with Trump’s tariffs on Canada and Mexico!

Let me remind you again… Most of the commodities traded globally are not physical. They’re financial derivatives, an IOU for future delivery of hypothetical commodities at a contractual price, time and place. In good times, nobody wants 10,000 tons of cotton or 25,000 barrels of crude oil delivered to their home. And the system works just fine. In uncertain times, unfortunate investors learn all too quickly that there’s a very small table holding up that enormous house of cards…

Numismatic News also points out that a similar thing recently happened in China, while also highlighting that the most lagging demand sector, that being European private bullion, is starting to pick up where it left off.

This is surely a story that will unravel further, and we have little doubt that all along the way, we will be assured that the gold and silver prices aren’t suppressed and that there is no market manipulation or overleveraging.

Phew, good to know.

Iraq is buying massive amounts of physical gold (alongside just about everyone else)

If you yourself have bought gold recently or have a sensible allocation, then you have probably noticed.

But it feels that most aren’t really noticing the signals, the alarms, the warnings. Perhaps because they haven’t been informed as to how they look.

When a country like Iraq, for example, increases its central bank gold reserves by 45% in just three months, that is a sign of something big happening.

Iraq, which ranks very low on the official economic development list, now holds 152.7 tons of gold, a hoard to rival those of much bigger and more prosperous nations.

Actually, it is even more interesting to see that Lebanon is the third-largest Arab country in terms of gold stockpile, holding a generally but especially relatively massive 286.8 tons.

Lebanon recently topped some very unappealing charts as its annual surge in food prices topped 300%, an unbelievable figure and more than twice that of the second-runner.

Iraq’s currency isn’t doing much better, as its $12 billion gold hoard amounts to 17.83 trillion dinars.

The central bank has been among the few to profit there, enjoying both a global rise in U.S. dollar-denominated gold and an even sharper rise in dinar-denominated gold.

We have suggested that, instead of putting forth a gold standard, the BRICS nations might simply instead hoard gold and let the citizens deal in worthless paper. Russia is already doing it.

But what does this mean for the still-expensive euro, which ranks above the U.S. dollar in valuation but whose nations are nonetheless stockpiling gold?

Between gold surpassing the euro as a global reserve and entrenched European Union members like Poland buying tens, if not hundreds of tons of gold, we seem to be getting some money clues here.

All of these central banks are clearly preparing for something as well as covering their bases. It would do well for the individual investor to do the same.

All the more so since U.S. hasn’t kept its own house tidy, with tales of empty vaults and a sovereign debt that puts any other nations to shame.

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