Is There Really Gold Bullion Stored at Fort Knox?

Have you ever wondered if the U.S. government has ever allowed an outside audit of the gold in Fort Knox?”

Yes, they have, but that was over FIFTY YEARS ago!

Supposedly the biggest stash of gold in the world, and the government won’t verify that it’s actually there? One doesn’t have to be a fan of conspiracy theories to conclude Uncle Sam might come up a little short if and when such an accounting is done.

But the U.S. goverment wouldn’t be alone in that position; he very well could be joined by a good number of the world’s central bankers.

Isn't it interesting that we don’t have hard data on how much gold is in the till of any central bank—which is the point. No one (outside of the central banks) has those data.

While that may change, the fact that central banks have been, to be charitable, inconsistent in accounting for their gold—their primary tangible asset—is important in evaluating the supply and demand picture.

This strange accounting policy comes largely from an institutional sleight of hand related to gold leasing. The fact is that central banks lend gold to commercial banks at ridiculously low interest rates… sometimes less than two-tenths of one percent. The theory seems to be that something, however small, is better than nothing, on an otherwise dormant asset… but years ago the rates charged to borrowers of gold were in line with those for other assets.

So, why so low now? In our opinion, it’s because the central bankers, masters of fiat currency that they are, want more gold on the market to keep the price low… thereby protecting the myth of stable paper currencies, even as they are printing more specimens all the time.

Regardless, having received a central bank’s gold, the commercial bank sells it and deploys the proceeds in higher-yielding loans or financial instruments. The gold that is sold then becomes someone’s portfolio asset or is used in the fabrication of jewelry or something else. Nonetheless, it stays on the books of the central bank, like one of those subatomic particles that can have two locations at once.

While central banks are public about official sales of their stash, with loud announcements usually coming as gold approaches critical price points, they are anything but public when it comes to leasing. That has given rise to a debate over how much gold the banks have actually leased. When there’s something you don’t want to talk about, people will talk.

This is important because, as you’ll note in the supply numbers just discussed, there are no line items labeled “Central Bank Leasing.”

Why not? Because the central banks aren’t telling. Instead, their balance sheets continue to carry the gold they’ve leased out, as though it were still tucked safely in their vaults, which leaves the door wide open for double counting.

That accounting sleight of hand tends to hold down the price of gold... until it is overcome by investor demand!

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