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Gold in vault, yes or no?

Officially the United States government holds about 261 million ounces of gold reserves. The last audit of this gold was 64 years ago. However, in testimony to Congress a few years back, the general counsel for the Federal Reserve testified that all gold reported as being in the vaults was actually there.


Unfortunately, the sensible follow-up question that should have been asked at the time, but was not, is who has title to the gold in the U.S. government vaults.

The question of whether the U.S. government really owns and has possession of its stated reserves is far more important than the public realizes.

An acquaintance of mine, Jeffrey Christian, takes credit for promoting the idea in the early 1970s that central banks could earn income off their gold reserves by leasing them. The central bank could, for instance, lease gold to a mining company that would then sell the physical bars to obtain cash flow. Then, as new gold was mined it would be used to pay back the lease.

The benefit to the central bank in such an arrangement would be earning some interest income. By pinning down its future selling prices for future production, the advantage to the mining company is that it could guarantee adequate cash flow to finance future mining operations

In such a transaction, the central bank would not possess the physical gold though it would still hold title to the ounces. Since the gold bars were melted and transformed, the central bank would not get back the exact same metal at the end of the lease.

If this were all that was involved, perhaps reports of central bank gold reserves could be accurate. However, most were required to overstate their holdings.

Until a few years ago, the International Monetary Fund required central banks to report as reserves the gold in their custody, whether they owned it or not, plus any gold out on lease. If one central bank leased gold to another, which happens a lot, both were required to simultaneously report the same gold bars as part of their reserves.

(When Vladimir Putin became Russia’s leader, for example, he found that the central bank’s vaults held only about four million of the reported 16 million ounces of gold reserves. Thereafter, as leases expired, that government then aggressively repatriated its gold reserves.)

A few years ago, the IMF changed its regulations to permit, but not require, central banks to more accurately report only gold reserves. Only some have done so.

The U.S. government deliberately seeks to maintain the secrecy of its gold trades and swaps as confirmed in a Sept. 17, 2009, letter by then Federal Reserve Governor Kevin Warsh (posted at The Gold Anti-Trust Action Committee, Inc. ( in 2007 had filed a Freedom of Information Act (FOIA) request seeking details on the U.S. government’s secret gold trading activities. Although the Federal Reserve did release 173 pages of documents, it failed to include copies of information posted on its own publicly accessible website. After GATA sued for further documents, the Fed dug in its heels, but was ultimately forced to release another document that confirmed that the organization does engage in activities to manipulate the price of gold.

GATA has accumulated significant documentation, posted on its website, that confirms that the United States and other governments, the Bank for International Settlements, the International Monetary Fund, and central banks have for decades engaged in secret activities to suppress the price of gold. Overstating gold reserves is just one means toward this end.

Officially, central banks and governments worldwide own about one billion ounces of gold. That is almost 20 percent of all gold on the planet.

How much does this figure overstate just how much gold governments and central banks actually do possess?

Late last decade, Jessica Cross, an analyst for GFMS, issued a report on central bank gold leasing. She projected that somewhere between 15 percent to 25 percent of reported gold reserves were not in the custody of any government or central bank because they had been leased to outside parties.

Researchers and former central bankers James Turk and Frank Veneroso and the late analyst Adrian Douglas have studied central bank gold leasing for decades. In their judgment, at least 25 percent and possibly more than half of all reported government and central bank gold reserves are no longer in their vaults.

Their contention is that most of this gold was secretly leased to make it appear that gold supplies are more plentiful than they really were as part of a U.S. government-led effort to suppress gold’s price.

Since a high percentage of the gold out on lease is no longer in original form, these central banks have little likelihood of ever being able to reclaim possession of all leased gold.

There are major suspicions that even if the U.S. government does have custody to all of the gold it claims, it may no longer have title to a high percentage of it. If true, that would explain why the Federal Reserve is so resistant to being audited.

Perhaps another indicator of a developing gold supply squeeze is the rising interest rate for one-year gold leases. By analyzing the differences in the COMEX futures prices, the current lease rate is about 0.72 percent. This is the highest it has been since 2009. As recently as mid-April, the one-year gold lease rate was down under 0.25 percent. Keep an eye on this trend.

Any evidence that the Fed has far less gold reserves than it has been reporting would immediately harm the U.S. dollar and push up the price of gold. So, what kind of assets do you want to be holding to protect your future?

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He was also honored by the Numismatic Literary Guild in 2016 for the Best Dealer-Published Magazine/Newspaper and for Best Radio Report. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at

This article was originally printed in Numismatic News Express. >> Subscribe today

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