Unveiling the Enigma of U.S. Gold Reserves: The Importance of a Comprehensive Review
The Gold Market Whispers
Get a fresh perspective on the gold market with this unconventional exploration of rumors, conspiracies, and historic events.
Two legendary whispers have circulated within the gold markets for years, with some dismissing them as outlandish theories. But should we take a fresh look at these aging mysteries? Here's a closer look at the two gold market conspiracy theories and the uncomfortable truths they may hold.
The first whisper revolves around China's gold stash. Some claim that China has secretly horde far more gold than reported, a possibility now seeming almost certain given recent disclosures. The other deafening rumor paints a different picture for the United States – holding far less gold than the official 8,133 tonnes claim.
This suspiciously grave situation dates back to 1971, when lawyer and financial advisor Peter Beter dropped a bombshell. He alleged that gold in Fort Knox had been removed and revealed his findings in his best-selling book, The Conspiracy Against the Dollar.
Gold Secrets Getting Unveiled?
However, the lack of transparency from US authorities has long been a sore spot in the gold market. Both current US President Donald Trump and Department of Government Efficiency head Elon Musk have hinted that this could change soon.
Daftly lingering in the past, we must rewind the clock to 1933, when the United States abandoned the gold standard in a bid to spur growth. Franklin D. Roosevelt, then-president, infamously devalued the US dollar relative to gold, revaluing gold instead by 70%. This gold-boosting strategy saw US gold reserves skyrocket in the following years.
Some of this surging gold came from US citizens, who were forbidden to own gold. Other gold came from government gold purchases when increased gold prices triggered a mining boom and imports. The United States even dabbled in foreign market gold purchases to protect the higher gold price.
By 1939, on the brink of World War II, US official holdings reached a staggering 15,679 tonnes. Despite continuing growth, the situation became murky as the gold started disappearing. Just how much gold exactly made its escape during this period remains unclear.
In 1944, Allied nations convened at the Mount Washington Hotel for the United Nations Monetary and Financial Conference to design a new post-war monetary system. The system relied on the US dollar's gold backing for its stability. Ironically, the dollar's gold integrity was already under question before the war's end.
Post-war economic instability exacerbated the issue. From 1944 to 1954, increased gold supply caused the dollar to lose 33% of its purchasing power, although the Bretton Woods price of $35/ounce remained fixed. By 1965, US gold reserves had fallen by 9,500 tonnes – down 40% from the 1949 peak.
Attempting to stem the gold drain, the US government enforced various measures, including banning American gold purchases overseas, imposing the "equalisation tax" on foreign investments, and discouraging travel. Still, the winds of change blew strong.
Fears of the dollar's devaluation following Kennedy's victory sent the gold price in London soaring to $40/ounce. The Bank of England collaborated with the Federal Reserve to manage gold prices, creating the London gold pool in 1964. Six more European nations joined the pool the following year.
But the pool struggled to contain pressure from growing demand. By 1967, the London market faced unprecedented gold demand, with 100 tonnes per day purchased. Despite restricting forward buying, leverage, and purchases with credit, the pool lost 1,400 tonnes that year alone – more than a year's worth of mined supply.
Bretton Woods' Fall from Grace
Rising inflation and declining international confidence in the dollar sank the Bretton Woods system. Non-American nations resented a system in which they needed to produce $100 worth of goods for a mere $100 bill, while the US could simply print money. The French finance minister Valéry Giscard d'Estaing famously called it "America's exorbitant privilege."
Tired of the status quo, French President Charles de Gaulle demanded gold for France's dollars and sterling balances. Even battleships were sent to collect the gold from New York. Alas, poor de Gaulle, who fell victim to several assassination attempts – a fate seemingly linked to his gold demands.
By 1967, US foreign liabilities totaled $36 billion, yet the country only had $12 billion in gold reserves, a third of what was needed to back the dollar. Germany, Spain, and Switzerland began requesting gold, even the British asked the Americans to prepare $3 billion worth of Fort Knox gold for withdrawal. Private gold demand was relentless.
On 11 November 1967, the British government devalued the pound by 14%, down to $2.40 from $2.80. Throughout that month, the London market saw more gold demand than usual – up to 100 tonnes a day. Desperate to suppress demand, they banned forward buying, leverage, and purchases with credit. Nonetheless, the pool lost more than 8% of its reserves during the final 15 months – over 3,000 tonnes.
The stark escalating pressure on the US dollar couldn't be ignored. It all came to a head in 1971 when President Nixon took the US off the gold standard, a decision that lingers to this day. For the first time in history, gold no longer played a role in the global monetary system – save for Switzerland.
The end of the gold standard marked a pivotal chapter in the gold market, laying the groundwork for the speculators to take over. In his announcement, Nixon justified his actions: "I have directed the secretary of the Treasury to take the action necessary to defend the dollar against the speculators."
US Gold: Still Hiding in Fortress Fort Knox?
Since 1953, the US has conducted no comprehensive audit of its gold. There have been internal audits, notably between 1974 and 1986, though these were far from transparent.
Skeptics argue that the US spent its gold stash to maintain a higher gold price during the 1960s. Amid this new era of transparency, both Trump and Musk have vowed to audit the gold, reportedly even planning a livestream event for the occasion. Some even suspect that the gold has been stolen.
The Secretary of the Treasury, Scott Bessent, has assured the public that the gold remains present and accounted for. An audit update in 2024, he noted, offers a glimpse of the stored gold, though it was a simple internal audit.
Analysts question whether all the gold is still in Fort Knox. The US mint claims that minor quantities have been removed for testing gold purity during scheduled audits. No other gold has left the depository in "many years." But what exactly constitutes "many years" remains unclear – with some experts suggesting it might date back to the 1960s.
The purity of the stored gold is another open question, as much may not meet the quality expected by international bullion markets. Purported to be "coinmelt," the gold could require further processing before being admitted to the markets.
For now, market activity suggests business as usual. Central bank gold purchases continue, as they diversify their holdings and de-dollarize. This much-needed audit, however, cannot come too soon.
One prevalent theory circulating among conspiracy theorists holds that Treasury Secretary Bessent might monetize a portion of the gold following the audit, akin to Roosevelt's actions in the 1930s. However, Bessent has categorically denied this claim.
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Insight:
Conspiracies in political and economic contexts often revolve around secretive, often powerful groups allegedly manipulating events for their benefit. While these theories have captivated the public for years, the line between conspiracy and truth can be blurry. In the case of the gold market, historical events and ongoing questions around gold reserves has kept murmurs of conspiracies alive. Recently, heightened focus on transparency has given a fresh breath of life to these mysterious tales.
- With the recent hints from US President Donald Trump and Department of Government Efficiency head Elon Musk suggesting a change in transparency from US authorities, some might speculate the upcoming audit of US gold reserves could potentially unveil long-held secrets about the exact amount of gold the country has.
- As the gold market continues to operate based on the official 8,133 tonnes claim for the United States, skeptics find it intriguing to ponder the implications of a potential discrepancy between the country's reported gold holdings and the actual amount stored, such as the secretive hoarding of gold as some claim China might have done.
