Good News: The US Treasury has a little over 261 million ounces of gold which, because of Breton Woods, they value at a price of $42.22 per ounce, giving it a book value of slightly more than 11 million dollars. The gold appears to be in repositories and while the amount has fluctuated slightly prior to 2006, the number has apparently settled at the level first noted in March 2006 and remained unchanged, including monthly working stock at the mint, since then.
The above should be consolation for all the theorists who say the US no longer has any gold in Ft. Knox, or Denver or anywhere else. Physically, the gold is right where the government says it is.
Fiscally, well, that’s where some of the bad news comes in.
In numerous reports, the US Treasury confirms that it has 261 million plus ounces of fine gold in its various vaults and storages. At the agreed upon price of $42.22, it is booked at a value of slightly more than 11 billion dollars. (I know the paper price is higher; again, this is because of Breton Woods.)
However in May of 2007, the US Treasury’s report on US International Reserve Positions changed from reporting “gold stock” to reporting “gold (including gold deposits and, if appropriate, gold swapped).
This change in wording appears to have opened the way for the US Treasury to continue to report gold being stored in its depositories as still on the Treasury’s inventory, but allow for swaps to be made that would allow other entities to claim an ownership in that gold while physically it is still in the care of the US Treasury. Such an arrangement would of course be a nightmare for accountants who might unknowingly be counting the value of the gold twice.
Coincidently, the Federal Reserve Banks have since at least 2002, reported assets of slightly more than 11 billion dollars in a“Gold Certificate Account”.
The US Code, Title 31 5517(b) indicates the Secretary of the Treasury “shall issue gold certificates against gold transferred under subsection (a) of this section.
Subsection (a) “All right, title and interest, and every claim of the Board of Governors of the Federal Reserve System, a federal reserve bank and a federal reserve agent, in and to gold, is transferred to and vests in the United States Government to be held in the Treasury.”
Instead of asking if the government actually has the gold it claims to have, perhaps the real question should be “Of the physical Gold held by the U.S.Treasury, how much is unallocated and how much is already spoken for by at least one other governmental entity?” Since all departments of the government must use the same valuation ($42.22 per ounce) and the gold must be held by the Treasury, it would appear that the Federal Reserve may actually hold all right, title and interest in the nation’s gold, just like they now hold so much of the nation’s debt through it’s purchase of US Treasury Notes.
Disclaimer: Author is long GLD, SLV with some physical holdings in retirement accounts.
