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Where’s the gold? NY Fed undergoes first-ever audit

Published time: August 04, 2012 02:57
Edited time: August 04, 2012 20:48
AFP Photo / Michal Cizek

AFP Photo / Michal Cizek

A massive trove of gold kept under lock and key five stories below Manhattan at the New York Federal Reserve has been undergoing its first audit in history. It could put conspiracy theories - for example, that the gold is a sham - to sleep for good.

According to the official record, the US government keeps billions of dollars in gold stored beneath the New York Fed's Italian Renaissance fortress around the block from Wall Street.

But conspiracy theorists claim that the gold stock may have been stolen years back in a dramatic caper, that it's been used for backdoor deals with foreign governments, or even that it's been removed and replaced with gold-painted metal bars.

And as many know, the stash has caught the attention of some politicians, most notably Texas Representative Ron Paul.

For years, Paul has called for an independent audit of not only the New York Fed, but of the Federal Reserve Bank as a whole.

But the government hasn't been eager to grant his wish.

In 1981, when Paul served on the Gold Commission – a panel formed by Congress to look into expanding gold's role in the US financial system – he argued for full gold audits to be carried out on an annual basis.

He has proposed legislation for an exhaustive review of all the gold kept on US soil, which includes bullion owned by various foreign governments in addition to America's.

"If the gold is there and everything is in order, they should welcome an audit," Paul said, as quoted by The Los Angeles Times.

Now, things seem to be moving in Paul's direction, at least at the New York Fed – which is by leaps and bounds the largest by assets, and most influential of America's 12 reserve banks.

The US government has been quietly carrying out an audit of all the American-owned gold at the New York Fed. The process involves drilling small holes in about ten per cent, or roughly 350, of the bars to make sure they're pure.

About a half dozen Mint, Treasury Inspector General's Office and New York Fed employees took part in the audit. It's being monitored by the Government Accountability Office, the branch of Congress that wields investigative powers.

Other than that, Treasury officials have thus far refused to provide any details about the operation or its findings. They only say that the results will be announced towards the end of the year.

The New York Fed has also refused to comment.

But one anonymous Fed official, apparently speaking in the direction of conspiracy theorists, quipped recently that the audit will show that "Goldfinger didn't sneak in at night" and take off with the gold.

Though the gold kept at Fort Knox, West Point and the US Mint in Denver, Colorado, have all been audited and tested in the past, the remaining 5 per cent – or about $21 billion – of America's gold, held at the New York Fed, has never been exhaustively checked out.

Taking into consideration the gold owned by other nations, the New York Fed's vaults hold about 23% of the world's official gold reserves.

And even if the audit shows that the gold's all there, it's not likely to satisfy many, including Paul.

He claims he's not concerned with whether the gold is real or fake, but with the paperwork that would outline what it's been used for. Many suspect deals that were never made public, like loans to foreign governments.

The US stopped backing dollars with gold in 1971, bringing an end to the Gold Standard. Today, the gold in vaults across the country carries little weight, so to speak.

To that, Paul suggests that Washington simply get rid of it.

"I would just as soon they sell the gold," he's said. "And then we would find out if they really had it.

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