The Fed Has 6,200 Tons of Gold in a Manhattan Basement—Or Does It?

The Fed Has 6,200 Tons of Gold in a Manhattan Basement—Or Does It? By Katy Burne.

Eighty feet below the streets of lower Manhattan, a Federal Reserve vault protected by armed guards contains about 6,200 tons of gold.

Or doesn’t.

The Fed tells visitors its basement vault holds the world’s biggest official gold stash and values it at $240 billion to $260 billion.

But “no one at all can be sure the gold is really there except Fed employees with access,” said Ronan Manly, a precious-metals analyst at gold dealer BullionStar in Singapore. If it is all there, he said, the central bank has “never in its history provided any proof.” …

Visitors on vault tours see only a display sample and can’t verify bars up close.

“All you see is the front row of gold bars,” said James Turk, co-founder of Goldmoney, a gold custodian. “There’s no way of knowing how deep the chamber is or how many rows there are.” …

Many commentators are pretty sure the US authorities play games to keep the price of gold down — after all, they manufacture a competing currency, the US dollar, that they claim is as good as gold:

Mr. Turk, based in London, believes much of the gold has been “hypothecated,” or lent out to other parties, and then rehypothecated, or lent to multiple parties at once. In doing so, he says, “central banks actually own less gold than people believe.”

Some gold bugs — investors bullish on the yellow metal— think the Fed secretly lends it out to suppress prices, partly to protect the dollar’s value. In theory, the Fed can feed gold into the market through swaps with other countries.

James McShirley, who owns Sulphur Lumber in Sulphur Springs, Ind., and has traded gold, believes investment banks, probably as agents for the Fed, act to lower prices when gold futures gain 1%. “It’s totally logical that in addition to maintaining artificially low interest rates,” he said, “it would be imperative to keep gold suppressed as an inflationary barometer.”

This article is notable because it is the first time anywhere that the media have mentioned the gold price suppression. Until this article, the media deliberately never mentioned it. Yes, it is deliberate — people report editors explicitly saying that they have such a policy. This very article originally mentioned an organization, GATA, that promotes awareness of the gold price suppression, but all mentions were removed before publication. You’ve got to wonder why.

Having traded gold on the Comex in NY (remotely), I am pretty sure the commentators are correct. There is a ton of evidence that the US monetary authorities hate gold and do their best to keep its price down. So, the thinking goes, if they ever lose control and are overwhelmed by the market, or they stop  suppressing it, then the price of gold will go up.

The total value of all the gold ever mined is currently about US$7 trillion. The value of all the current debt/paper currency in the world is about US$250 trillion. So, gold has been sidelined by the western monetary authorities since Nixon took the US off gold in August 1971.

However, if people lose confidence in paper currencies — perhaps because inflation heats up when the next recession causes the central banks to print (they cannot lower interest rates further, as they normally do by about 3% when a recession comes) — then there may be calls to return to backing paper currencies with gold, as a means of stemming over-manufacture of paper dollars. That would require the value of the gold to go to a meaningful fraction of the US$250 trillion — maybe a quarter to a half. The effect on the gold price would be considerable.