In the Netherlands we have a financial newspaper that prints on pink paper and is named “Het Financieel Dagblad”. Basically it’s the Dutch equivalent of the Financial Times. A few weeks ago I was interviewed by two of their reporters, Joost van Kuppeveld and Lenneke Arts. Today the interview was published as part of a series of interviews with gold experts, among others, with myself and Aerdt Houben, Director Financial Markets at the Dutch central bank (DNB). Perhaps not surprisingly I disagree with several statements of Houben in his interview, to which I would like to respond in a forthcoming post. For now, you can read my interview below. In case readers didn’t know my real name is Jan Nieuwenhuijs, and Koos Jansen is my Internet alias. Het Financieel Dagblad preferred to disclose my real name.
“The whole world is now in the same boat. Everywhere there are low interest rates and on all continents money is printed. Only the United States has paused printing for the moment.
There are many flaws in fiat money. You can print it without limitations, which is politically too tempting. Fiat money printing was used to save the financial system in 2008, but since then nothing has changed. Banks are not split. In a next crisis it’s going to end badly with paper money. There will be significant inflation.
Gold is a hard currency. It can’t be printed – like fiat money. It is divisible and it does not perish. It retains its purchasing power in the long term. If it’s in the center of the monetary system, it will also be more stable in terms of purchasing power in the short and medium term. That has to do with economic principles; it is a commodity. In that respect I feel safe by keeping a portion of my savings in physical gold. I am protected from economic shocks. If the euro falls gold rises, and so my purchasing power is maintained.
Something has to happen in the international monetary system. It cannot stay centred around the dollar. Since 1971 – when the dollar was detached from gold – the United States has an exorbitant privilege. Most trade in the world is settled in dollars. Therefore, there is a huge demand for dollars in the world, and the US can simply print these dollars.
In the new system gold is going play a role. Look at the developments in Europe. The Netherlands and Germany get their gold back from America. Austria and Belgium are also repatriating. Russia and China buy a lot of gold. The Chinese have too many dollars in foreign exchange reserves and are therefore at the mercy of the whims of US policy. The transition to a new system will be gradual. No one wants a new shock.
With my blog I try to fill the gap between mainstream media, who do not understand gold, and conspiracy theorists. I always try to seek the truth. Because if we get a new financial crisis, we must know the truth. The Dutch central bank shouldn’t state it holds 600 tonnes if it can’t show us the audit reports and gold bar list. That’s why I’m pushing for the audit reports and gold bars list to be publicly released, but those requests find a lot of resistance at my national bank. While you would think they can be fully transparent. What’s there to hide?”
My hunt for the gold bar list of the Dutch official gold reserves started in 2015. On September 26 of that year I visited a conference in Rotterdam, the Netherlands, called Reinvent Money. One of the speakers was Jacob De Haan from the Dutch central bank (DNB) Economics and Research Division – you can watch his presentation by clicking here.
In his presentation De Haan repeatedly talked about the importance of transparency in central banking. These statements raised my eyebrows, as I submitted a FOIA request at DNB in 2013 to ask for all correspondence between DNB and other central banks in the past 45 years with respect to its monetary gold, which was not honored. From my experience DNB was anything but transparent.
After the presentation I approached De Haan and asked him, if transparency is so important to DNB, why has it never published its gold bar list? An act of transparency that could be accomplished within minutes. De Haan offered me he would look into that. He gave me his email address and we agreed to stay in touch.
The next day I send De Haan an extensive email explicating my request at DNB to publish the gold bar list of the Dutch gold in excel sheet format. I wrote him it wouldn’t take DNB any effort, as I assumed the bar list was readily available.
De Haan never replied to my email, so I called his office in December 2015 to ask what the status was of my request. De Haan’s secretary answered my inquiry was not rejected but still being processed.
Weeks passed but I didn’t get any reply from De Haan.
On February 24, 2016, I decided to call DNB’s press department to ask about my inquiry. DNB’s spokesman, Martijn Pols, told me over the phone the subject was still being discussed internally, he even confirmed De Haan was involved in the decision making. DNB was considering releasing the document while carefully weighing al pros and cons, he said.
In the conversation Pols stated DNB was aware the German central bank (the Deutsche Bundesbank) released a bar list in October 2015 and there was a wish in Amsterdam to mutually harmonize this policy. I added that if DNB would go ahead with the publication their action would only be credible if the Dutch bar list would be complete (disclosing refinery brands, refinery bar numbers and year of manufacturing), in contrast to the incomplete list the Germans had published. Pols was aware of the format the Germans had chosen and took note of my comment. An ensuing question from my side what was holding back DNB in releasing the list could not be clearly answered.
Months passed without any news from DNB. On August 8, 2016 I decided to call Pols again for a status update. He said he would reply over email. A few days later I received an email from DNB Head of Commutations J.W. Stal.
…. We can share the following information with respect to our gold reserves.
DNB is transparent about the amount (weight) and the value of our gold assets. This information can be found in our annual reports. Thereby, several media have visited the gold vault and video recordings have also been made. However, we do not intend to publish a gold bar list. This serves no additional monetary purpose to our aforementioned transparency policy, however it would incur administrative costs.
If you have any further question please contacts us.
Of course, in this day and age any gold bar list from a central banks should be readily available in excel sheet format, and releasing a sheet would not incur any administrative costs.
If the sole reason not to publish the gold bar list is that such an action would incur administrative costs I must conclude DNB doesn’t have the list readily available. Or is my conclusion erroneous? Does DNB have a complete gold bar list readily available or not?
If not, this is worrying because the gold bar list forms one of the most important checks on the existence of the Dutch official gold reserves, which provide essential stability to our economy.
In response to your email of August 11, 2016, to De Nederlandsche Bank (DNB), we can inform you as follows on our gold reserves and the related gold bar list. DNB has internal gold bar lists, however the conversion of internal lists to documents for publication would create too many administrative burdens.
We maintain our previous email, in which we stated publishing a gold bar list serves no monetary purpose other than transparency. And as previously noted, there are other ways for DNB to transparently communicate about our gold stocks.
We trust to have informed you sufficiently.
If DNB has its gold bar list properly (digitally) archived there should be no administrative cost whatsoever for publication. The argument presented by Stal makes absolutely no sense to me. If one owns over 600 tonnes of gold, why not have the physical assets accurately inventoried?
What could possibly be the problem to release the bar list of the Dutch gold located in Amsterdam, New York, Ottawa and London?
I would like to remind you that DNB is the only Western central bank that in recent years has successfully repatriated a significant amount of gold (122.5 tonnes) from the Federal Reserve Bank Of New York through a covertly executed operation. This underlines DNB is fully aware of the importance of its gold reserves in our current fragile financial climate. I think DNB does have the bar list readily available, but it chooses not to publish it for political reasons – think, tensions between its custodians in New York and London.
DNB claims to be transparent but in reality it’s not.
According to a press release the management team of the Dutch central bank has requested to investigate relocating the banknotes and gold vault that is currently located in the basement of bank’s headquarter at the Frederiksplein in Amsterdam.
In the press release we can read the reason for the investigation to relocate the vault flows from preparations to renovate the building that dates from 1968. While planning the renovation the subject to relocate the vault was brought up as the burdens for securing the metal is currently felt by all employees and visitors at the central bank’s headquarter. Storing 189.9 tonnes of gold at the Frederiksplein encompasses high security standards for all employees working in the building while nearly none of them have anything to do with the vault. In addition, whenever large batches of banknotes are transported to or from the vault the security measures can be complex in the center of Amsterdam. From this discomfort it’s considered to relocate the vault.
In November 2014 De Nederlandsche Bank (DNB) disclosed to have repatriated 122.5 tonnes from the Federal Reserve Bank Of New York (FRBNY), which brought the total amount of gold stored in Amsterdam to 189.9 tonnes and left an equal amount (189.9 tonnes) in New York. In London at the Bank Of England DNB has stored 110.3 tonnes and in Ottawa, Canada, 122.5 tonnes are stored. In total Dutch official gold reserves stand at 612.5 tonnes.
From my perspective the official reason presented to relocate the gold can be legitimate, but it can be a decoy as well. After studying film footage shot in the DNB gold vault from October 2010, January 2012 and March 2014, all from before the repatriation in November 2014, we must conclude the vault compartment we can see is sufficiently large to hold 67.4 tonnes, but would be very tight to hold 189.9 tonnes. Surely there are other compartments in the vault, as we can see in the videos, though I’m not sure if all areas have been designed to carry exceptional large tonnages of gold. The soil in Amsterdam is known for largely consisting of clay, as opposed to the bedrock in Manhattan, this can be problematic for storing gold. There is a possibility the vault in Amsterdam is not suited to store 189.9 tonnes of gold, or more if DNB would ever decide to repatriate additional gold from the US, UK or Canada.
When I called DNB today I was directed to a spokesman, Martijn Pols, whom I asked when a final decision would be made on the vault relocation and whether they have any new locations in mind. I was told the Dutch central bank will come to a final conclusion by the end of this year and no new locations are on table as of yet. While talking to this gentleman I also took the opportunity to ask about the gold bar list.
On 26 September 2015 I visited a conference in Rotterdam, the Netherlands, called Reinvent Money. One of the speakers was Jacob De Haan from DNB’s Economics and Research Division – you can watch his presentation by clicking here. In his presentation De Haan repeatedly talked about the importance of transparency in central banking. These statements raised my eyebrows, as I’ve submitted a FOIA request at DNB in 2013 to ask for all correspondence between DNB and other central banks in the past 45 years with respect to its monetary gold, which was not honoured. From my experience DNB was anything but transparent.
After the presentation I approached De Haan and asked, if transparency is so important to DNB, why it has never published its gold bar list – an act of transparency that could be accomplished within minutes. De Haan offered me he would look into that. He gave me his email address and we agreed to stay in touch.
The next day I send De Haan an extensive email explicating my request at DNB to publish the gold bar list of the Dutch official gold reserves in excel format. I wrote him it wouldn’t take DNB any effort, as I assumed the bar list is already in their possession. De Haan never replied to me over email, so I called his office in December 2015 to ask what the status was of my request. De Haan’s secretary answered my inquiry was not rejected but still being processed.
Today, when I asked DNB’s spokesman over the phone about the bar list he answered the subject is still being discussed internal, he even confirmed De Haan was involved in this matter. Currently DNB is considering to release the document while carefully weighing al pros and cons, I was told. In the conversation Pols stated DNB knows the German central bank released a bar list in October 2015 and there was a wish in Amsterdam to mutually harmonize this policy. I added that if DNB would go ahead with its list their action would only be credible if the list would be complete, including all refinery brands, refinery bar numbers and year of manufacturing, in contrast to the incomplete list the Germans published. Pols was aware of the format the Germans had chosen and took note of my comment. An ensuing question from my side what’s holding back DNB in releasing the list could not be clearly answered.
Every year the gold in Fort Knox is ‘audited’ by checking the official joint seals that were placed on all vault compartments during the continuing audits of U.S.-owned gold from 1974 until 1986, when allegedly 97 % of the (Deep Storage) gold was inspected. However, a Freedom Of Information Act request I’ve submitted in order to obtain all audit reports could not be honored. Seven reports are missing.
From at least 1944 the world reserve currency is the US dollar, which was backed by gold until 1971 and supported by gold ever since. There can be no world reserve currency without appropriate gold reserves supporting it, providing essential confidence and credibility. The US official gold reserves are the world’s greatest by far at 8,134 metric tonnes. The fact that 7 audit reports that should grant the existence of these reserves appear to be missing is problematic.
At the congressional hearing of the Gold Transparency Act (H.R. 1495, not enacted) in 2011 the Inspector General (IG) of the Treasury presented a case ‘all is fine’, but all is not fine. And the problem goes far beyond missing audit reports. In a series of posts we’ll continue to examine all there is to find regarding the audits of US official gold reserves.
Let’s recap what we’ve studied in the previous posts. The US Treasury currently owns 8,134 tonnes of gold of which 7,716 tonnes is stored by the US Mint (4,583 tonnes at Fort Knox, 1,364 tonnes in Denver, 1,682 at West Point) and 418 tonnes at the Federal Reserve Bank Of New York. We’ve focused on the first audits of the gold stored by the US Mint. A Fort Knox physical gold audit in 1953 was anything but full, neither was the famous audit in 1974.
The Continuing Audits Of U.S.-Owned Gold 1974-1986
Currently the Office Inspector General of the Treasury is responsible for the audits of the gold reserves at the US Mint. At the congressional hearing of the Gold Transparency Act in 2011 Inspector General (IG) Eric Thorson stated:
Before I discuss the details of the audits that are the topic of this hearing, I want to make one point very clear: 100 percent of the U.S. Government’s gold reserves in the custody of the Mint has been inventoried and audited. Furthermore, these audits found no exceptions of any consequence. I also want to assure you that the physical security over the gold reserves is absolute. I can say that without any hesitation, because I have observed the gold and the security of the gold reserves myself.
He said this, but there is no proof. His statement “100 percent of the U.S. Government’s gold reserves in the custody of the Mint has been inventoried and audited“ is impossible to confirm, as we’ll see later on.
More from Thorson:
In June 1975, the Treasury Secretary authorized and directed a continuing audit of U.S. Government-owned gold for which Treasury is accountable. Pursuant to that order, the Committee for Continuing Audit of the U.S. Government-owned Gold performed annual audits of Treasury’s gold reserves from 1975 to 1986, placing all inventoried gold that it observed and tested under an official joint seal.
The committee was made up of staff from the Treasury, the Mint, and the Federal Reserve Bank of New York. The annual audits by the committee ended in 1986 after 97 per cent of the Government owned gold held by the Mint had been audited and placed under official joint seal.
Ron Paul asked:
…It seems that a portion of the Mint and the U.S. gold reserves were audited in an assay between 1993 and 2008, as you acknowledged. The Mint estimated that as much as one-third of the gold reserves were examined during this period. The other two-thirds, however, have not been inventoried–that is according to my understanding–or assayed since somewhere between 1975 and 1986. Do you think it would be worthwhile, at least, to inventory and assay this portion of the Mint-held gold?
Eric Thorson replied:
By–I forget which date it was, I believe by 1986, we–hold on just one second here, I got it. It basically covered–by 1986, 97 percent of the Government-owned gold held by the Mint had been audited and placed under joint seal. So once you have done that, and that seal remains unbroken, then I am not sure what other benefit there would be to going back into it at that point. But by 1986, you had 97 percent was audited–
Connecting thereto, from Thorson’s opening statement:
My office began conducting annual audits of the gold reserves in Fiscal Year 1993.
Since 1993, when we assumed responsibility for the audit, my office has continued to directly observe the inventory and test the gold.
…At the end of Fiscal Year of 2008, all 42 compartments had been audited by either the GAO, the Committee for Continuing Audit of the U.S. Government-owned Gold, or my office, and placed under official joint seals. There has not been any movement of inventoried gold since that time.
From 1993 to 2008 the remaining 3 % of the gold reserves stored at the US Mint has been audited – I assume. For this post we’ll focus on the continuing audits of U.S.-owned gold, as these audits should proof there is gold in Fort Knox. By gathering information from audit reports from 1974 – 1986 (the ones I could get my hands on) and statements made at the congressional hearing in 2011 we’ll analyze our way through this. I have copied as much quotes in this post as I can to minimize the possibility of an erroneous interpretation of the official text in the audit reports.
At the hearing Thorson presented exhibits to support his case 100 % of the gold held at the US Mint has been audited. Next, we can see Thorson’s list he presented of physical gold audit reports of the continuing audit program from 1974 to 1986.
On this sheet 5 physical gold audit reports are listed, framed in red. The reports from 1974 and 1977 we’ve extensively analyzed in my previous post Second Thoughts On US Official Gold Reserves Audits, published on February 9, 2015. After writing it I’ve been trying to collect all audit reports dating from 1974 – 1986. The 1974 Fort Knox audit by the GAO has been acknowledged and adopted by the continuing audits committee, so this it became part of the continuing audits.
In total there should be 13 reports (1974 – 1986), 2 already were in my possession (1974 and 1977). With regard to my quest for all reports, let’s have a look what US government departments could not deliver what I was looking for:
First was the Counsel to the Inspector General Department of the Treasury. Because this is the department currently responsible for the audits I was surprised my request to obtain all audit reports wasn’t honored. They could only find 2 reports I didn’t posses previously, of the audits conducted in 1985 and 1986. They wrote me by email:
Mr. Nieuwenhuijs – our Office of Audit found:
as well as GAO’s 1974/1975 and 1978 reports.
That’s everything we have, or are aware of.
Counsel to the Inspector General
Department of the Treasury
The “1974/1975 and 1978” reports refer to the audits conducted in 1974 and 1977.
The Counsel to the Inspector General Department of the Treasury told me his department only had 4 of the 13 reports I was looking for. His advice to me was to try at the General Accounting Office (GAO) and National Archives for more reports. I would like to stress the importance of this failure to deliver the audit reports of 97 % of the official US gold reserves by the department directly responsible at this point in time. At the congressional hearing in 2011 the IG stated to be 100 % certain all gold stored by the Mint was inventoried and audited, yet his department had access to only a fraction (4) of all audit reports (13).How can the IG be positive if he did not have access to the most basic documentation? The answer is, he can’t.
Meanwhile I was fortunate to find the 1981 audit report at the website The Golden Sextant from Reg Howe. This document also contains a summary of the 1980 audit – which, by the way, isn’t less detailed than the full 1981 report. For the sake of simplicity, let’s say I have both audit reports, 1980 and 1981. That’s 6 down, 7 more to go.
Next was the GAO; unfortunately they couldn’t deliver anything I was looking for. Instead, I was advised to contact the Treasury. Same story at the US Mint and US National Archives. There was nothing left to do but submit a Freedom Of Information Act (FOIA) request.
On February 25, 2015, I submitted a FOIA request in order to obtain the audit reports drafted by the Continuing Audits Of U.S.-Owned Gold committee in 1975, 1976, 1978, 1979, 1982, 1983 and 1984. Shortly after I got an email that stated my request had been received and was being processed.
Two months later I still got no response. When I logged in at my account at the FOIA website, I saw my request had disappeared. I decided to send an email to the FOIA online Help Desk to ask what happened to my request. The next screen shot is from the reply by the FOIA help desk on May 6, 2015.
My FOIA request had disappeared, or did it? After some correspondence back and forth I finally got an email saying my FOIA was exported out of FOIAonline because my request was for access to historical records. Then, the official response from the offline department to my request I received on May 13 as a PDF attachment (click here to view) – oddly enough it’s dated ‘March 25, 2015′ but not sent to me at the time. This is what it said:
This is in response to your March 2, 2015 Freedom of Information Act (FOIA) request for records in the custody of the National Archives and Records Administration (NARA). Your request was received in this office on March 3, 2015 and assigned FOIA case number RD 45578.
You requested access to audit reports of the United States Department of the Treasury’s official gold reserves published by the “Committee for Continuing Audit of the U.S. Government-owned Gold” for the years 1975, 1976, 1978, 1979, and 1981-1984.
Using the terms:
GOLD, RESERVES, REPORT(S), AUDIT, COMMITTEE FOR THE CONTINUING AUDIT, COMMITTEE, INSPECTOR GENERAL, ASSISTANT SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS, BUREAU OF FISCAL SERVICE, and BUREAU OF GOVERNMENT FINANCIAL OPERATION.
Our staff conducted a search using the National Archives Holdings Management System under the following records group numbers: RG 50 Treasurer of the United States, RG 56 General Records of the Department of the Treasury, RG 82 Federal Reserve System, RG 101 Office of the Comptroller of the Currency, RG 104 U.S. Mint, and RG 425 Financial Management Service. However, we were unable to locate records responsive to reports similarly titled or closely related to the subject annual gold audit 1975-1984.
For your information, we contacted a librarian at the Treasury Department who informed us that “reports from ‘Committee for Continuing Audit of the U.S. Government-owned Gold’…are not in our collection.” And we attempted to contact a records management officer at the Treasury Department, but did not receive a reply as of the date of this letter. Given the date range of your request 1975-1984, the nature of the report —an annual audit of gold, and the fact that reports of similar type have been periodically published on the Internet, it is likely that copies and drafts of these reports are in the legal and physical custody of the Department of the Treasury. You may consider submitting a FOIA request directly to the Treasury Department.
In short, the US National Archives could not extradite the 7 audit reports I requested.The reports were not present at the National Archives, the OIG or at the Treasury Department. I doubt an attempt to “submitting a FOIA request directly to the Treasury Department” will bring me anything; likely it will be a waste of time as I had already contacted all possible government departments separately, which could not deliver me the reports I was looking for despite none of them was unwilling to help me. I will, however, submit a couple of new FOIA’s at the US government regarding gold audits.
The reports I did find, and are now publicly available, are:
Coincidentally, or not, these reports are exactly the same ones as listed by Thorson at the congressional hearing in 2011 (exhibit 1, framed in red). It seems these 6 reports (5 documents) are the only ones “currently in existence” and the remaining 7 have mysteriously disappeared.
1980, 1981, 1985 & 1986 Audit Reports Anomalies
Remember, we’re investigating the audits of the greatest gold hoard on earth, which underpins the world reserve currency the US dollar.
We will discuss the remaining 4 audit reports at once, as they are very similar. I’ve found many anomalies that we’ll discuss. These could be better understood, or clarified, if we could obtain all audit reports from 1974 – 1986. However, until the missing audit reports show up we can only look at this case as it’s presented by the US government through the documents that are ‘publicly available’.
Federal Reserve Bank Of New York Stopped Auditing Gold During Continuing Audits Program
In June 1975 the Secretary of the Treasury authorized the continuing audits of the US owned “gold stock”. While the order is not very detailed, in the years that followed the committee started auditing gold stored at the US Mint and at the Federal Reserve Bank of New York (FRBNY).
In the 1980 report we can read the audit procedures and a few other snippets (we’ll quickly jump through) that help us understand how and where the audits were conducted:
Audit procedures included (1) inspecting the joint audit committee seals used to control compartments containing previously audited gold;(2)comparing the records for each compartment inventoried to the identifying information on the gold bars;(3) weighing, from each compartment inventoried, at least one randomly selected melt in each fifty melts (a melt, averages about 20 bars cast from one crucible of molten gold); (4) removing samples from a bar in each of the melts weighed and having the samples assayed; (5) verifying the mathematical accuracy of all inventory records; (6) verifying the inventoried gold to the institutions’ records; (7) verifying the quantities shown by the institutions’ records to the control accounts for gold maintained by the Bureau of the Mint and to the central accounts maintained by BGFO; (8) placing audited gold bars in compartments under Official Joint Seal and audit committee control; and (9) reviewing and evaluating internal controls and security procedures.
Committee for Continued Audits of
United States Government-owned Gold
Joseph F. Ruffley, sr Chairman
Bureau of Government Financial Operations [BGFO]
Thomas E. Diarforli
Bureau of the Mint
William M. Schultz
Federal Reserve Bank of New York
Schultz from the New York Fed was part of the continuing audits committee and therefor the FRBNY was supposed to be audited. Quoting from the 1981 report:
Gold at the Federal Reserve Bank of New York is audited periodically by examiners of the Board of Governors of the Federal Reserve System, Members of the Committee for Continuing Audits of United States Government-owned Gold representing the Mint and BGFO observed the audits at the invitation of the Board and the Federal Reserve Bank.
The initial intention is clear to us, the FRBNY was supposed to be audited; the gold to be counted, weighed, assayed and the compartments to be sealed (these were the audit procedures of the continuing audits committee). More from 1981 report:
The continuing audit is being conducted on a cyclical basis because of the enormous quantity of gold to be handled and the related costs. In performing the audit, the gold bars are physically moved from one vault compartment to another. During this operations, the melt numbers and the number of bars in each melt are verified with an inventory listing, and one in fifty melts is randomly selected for weighing and test assay.
…Compartments audited at Mint institutions and depositories are kept under official joint seal by representatives of the audit committee.
The compartments at the Mint were placed under official joint seal, whereas the FRBNY compartments were never placed under official joint seal (as we can read on page 11 of the 1980 audit report).
This suggests the gold at the FRBNY was stored so it could be easily transported in and out of the vaults, possibly through a corridor to the adjacent private vault at 1 Chase Manhattan Plaza – read this post by BullionStar gold researcher Ronan Manly for more information on the construction of the FRBNY vault and the connection to the vault across the street that was owned by JP Morgan, but recently bought by Fosun (October 2013), a Chinese investment conglomerate.
Let’s read more about the audits at the FRBNY conducted under the continuing audits program, a quote from the 1981 report:
The audit procedures followed [at the FRBNY] are essentially the same as those followed at Bureau of the Mint depositories, except that assay samples are not taken to verify the purity of the gold.
A quote from the 1985 report:
Although the quality of the gold in the custody of the Federal Reserve Bank of New York cannot be readily assayed, …
Not only were the vault compartments at the FRBNY exempt from being sealed, in addition, for an unknown reason assay tests were never performed at the FRBNY! More from the 1985 report:
The audit procedures followed [at the FRBNY] were essentially the same as those followed at Mint institutions except that assay samples were not taken to verify the purity of the gold and the audited gold was not under committee control after the audit. As a result, the gold at the Bank [FRBNY] is considered unaudited.
According to the reports available to us, in 1985 the committee had to conclude the gold at the FRBNY was never audited! The intention in 1975 was to audit the gold at the FRBNY, but then, a few years down the road the gold at the New York Fed was mysteriously exempt from the continuing audits program.
Assay Tests For US Official Gold Reserves Have Never Been Credible
Moving on to the assay tests conducted at the US Mint. An overview starting from 1953:
*In the 1953 report we could read 26 bars (0.00002 % of the total stash at that time) were assayed from bore samples. The assay tests found no irregularities. The assayer is unknown and there was no assay report included in the audit report.
*In 1974 the New York assay office tested 95 bars. Two tetrahedron-shaped chips were removed form the top and bottom of each bar assayed. The assay tests found no irregularities. There was no assay report included in the audit report.
*For all other ‘publicly available’ audit reports (1980, 1981, 1985, 1986) it’s very briefly mentioned assay tests were conducted, presumably for one in every fiftieth melt. No irregularities were found. The assayer is unknown and no assay reports have been included in the audit reports.
*For the audits performed in 1975, 1976, 1978, 1979, 1982, 1983 and 1984 under the continuing audits program allegedly 1 in 50 melts has been assayed, although there are no audit reports, nor assay reports, nor do we know who the assayer was.
*It’s likely 97 % of the audited gold by the continuing audits committee has not been assayed by an independent assayer. In 1977 the New York assay office, which is a subsidiary of the US Mint, conducted the assays. For the other years we don’t know what office performed the checks.
At this stage I haven’t been able to get my hands on any assay report from 1974 – 1986. But, the OIG disclosed assay reports – of the audits of 3 % of the US official gold reserves stored by the Mint – at the congressional hearing in 2011 (exhibit 3 and 4).
Let’s have a look. in 2004 the assayer was Ledoux & Company, a private contractor (read their homepage). Ledoux & Company found no irregularities in 2004. Then, from 2005 to 2008 the assay tests were conducted by White Sands Missile Range, which is a subsidiary of the US army. This fits right into how the US government imposes audits on their official gold reserves; the audits are performed by the US government itself. We’ve barely come across any independent auditor that saw, counted, weighed or assayed the US official gold reserves. In 2011 it was portrayed as if KPMG currently is the third party auditor (next to the owner and custodian), but this is not true. A separate post will be dedicated to KPMG.
The results of the assays by Ledoux & Company and White Sands Missile Range presented by the OIG at the congressional hearing show nearly all 9999 fine gold (see exhibit 3, or read page 62 to 124 from this document). This is remarkable. My assumption is, these assays from 2004 – 2008 are all assays authorized by the OIG from 1993 – 2008 and therefor cover 3 % of the gold stored at the US Mint.
In the excel sheet with the bar list of gold stored by the US Mint, published a few years ago, we can see nearly all the gold is “low purity” – roughly 90 % pure – very little was 9999 fine. Coincidentally almost all the gold assayed by the OIG from 2004 – 2008 was 9999 fine.
According to the excel sheet the US Mint stores 312 tonnes in 9999 fine gold, spread over 3 depositories; Fort Knox 15 tonnes, Denver 100 tonnes, West Point 197 tonnes. 312 tonnes of the total is 4 %. The OIG audited 3 % from 1993 – 2008. Technically it’s possible the OIG assayed exactly the remaining stash of 9999 gold, though chances are slim given the fact the 9999 gold was spread over multiple compartments at multiple depositories.
Why haven’t we ever seen any assays of “coin bars”? Coin bars are “assaying 899 to 901 per mille or 915 1/2 to 917 per mille”, roughly 90 % pure, and these types of bars allegedly form the bulk of the US official gold reserves. Former US Mint director Edmund Moy has stated in 2013 US reserves contain mainly coin bars because of the great confiscation in 1933 by President Roosevelt, when US citizens were forced to hand in all physical gold. All the golden coins that were handed in supposedly accumulated to the greatest gold pile on earth. However, as I’ve written in my post Where Did The Gold In Fort Knox Come From? Part One, all golden coins that circulated in the US before 1933 could not have supplied the US official gold reserves to the extent Mr Moy has stated.
The “coin bars” topic, which ties together with the existence of the US official gold, deserves a thorough study to be expanded upon in a separate post.
1,700 Tonnes At For Knox Was Re-Audited In Between 1983-1986
As we’ve seen thus far there are many problems with the official story ‘everything is fine, all the US official gold reserves all audited’. The missing audit reports and assay reports feed into our skepticism. And there is more, a lot more.
By the end of 1982 the continuing audits committee, which consisted of BGFO and US Mint staff, was “reorganized under the Department of the Treasury, Office of the Inspector General”. This was the first time the OIG was responsible for the audits of the gold at the Mint (note, this same OIG is still responsible for the audits). Then, something very strange happened in 1983.
If we carefully read the scarce audit reports available to us, we notice the audit procedures were revised in 1983. As a result more than 1,700 tonnes at the Fort Knox and the Denver depository, that were both fully audited and sealed at that time, needed to be re-audited. From the 1985 report:
In fiscal year 1985 audits of Government-owned gold were conducted at the United States Mint in Denver and the United States Bullion Depository in Fort Knox, Kentucky. The audits were conducted in accordance with the revised audit guidelines that required a statistical sample of gold melts within randomly selected compartments at the facilities.
…In October 1984, 4,136,046.924 fine troy ounces of gold were reaudited at the United States Mint, Denver. In July 1985, 11,912,458.207 fine troy ounces of gold were reaudited at the Fort Knox Depository.
…2/ As of September 30, 1982, 100 percent of the gold stored at the depository [Fort Knox] was audited under the initial continuing audit program. Between July 1983 and July 1985 the gold was audited in accordance with the plan approved by the Treasurer, as follows.
July 1983 15,248,015.541
July 1984 14,817,180.740
July 1985 11,912,458.207
July 1986 12,477,777.638 [this number I copied from the 1986 report]
…12/ As of September 30, 1984, 99.9 percent of the gold stored at the United States Denver Mint had been audited under the initial continuing audit program. In October 1984, 4,136,046.924 fine ounces gold was reaudited.
When thinking about these re-audits, three scenarios pop to mind:
In 1983 the OIG found out something was amiss with the audits performed 1974 – 1982. It was decided to destroy several audit and assay reports and no less than 1,700 tonnes needed to be re-audited.
The US government wished to open the vaults of audited gold to lease or sell the metal on the open market. An excuse was needed to break the seals. The BGFO and Mint staff was replaced by the OIG and the “revised audit procedures” were invented as a reason to open several compartments.
The auditors were bored and decided to re-audit 1,700 tonnes.
Why else would so much gold have been re-audited?
I shall rest here. More anomalies with regard to the audits of the US official gold reserves will be discussed in forthcoming posts. As will conclusions and speculation. In the meantime I will fire several new FOIA’s at the Office of the Inspector General and others. If official documents come to surface I will report accordingly.
The repatriation from the UK is not true…. There are other and more effective ways to verify if the gold in London is really ours. We have an audit committee that inspects the Belgian gold in the UK regularly…. Repatriating would be more expansive with transport, storage and security costs.
One thing is for sure, the Belgians are nervous about their gold (227 tonnes) held abroad. In December 2014 the Luc Coene admitted he was investigating to repatriate all Belgian gold reserves, on TV-network VTM Nieuws:
Luc Coene: If one feels that in surrounding countries these decisions are taken, one knows that this question will be asked to us as well. We’re pro-active investigating all the elements, so when the question will be asked, we can answer it.
The practical problem is the transport of the gold, with all the risk that come with it. Second, if we repatriate we need to setup a large security system in Belgium. Though currently this is done by certain central banks that are specialized in this.
Did the investigation point out the transport and storage costs would be too high? Currently the storage fee NBB pays to its custodians (BOE, BIS, Bank of Canada) is €250,000 a year. Is Belgium not repatriating because of the costs or because it got obstructed by other authorities?
Last week I reported about the mystery regarding the fine gold tonnage claimed to have been repatriated by the Netherlands and Germany in 2014 from New York (208 tonnes), and the drop in total foreign gold deposits disclosed by the Federal Reserve Bank Of New York (FRBNY) in 2014 (177 tonnes). The mystery – that adds to a long list of oddities – couldn’t be clarified to me by the central bank of the Netherlands, Germany or US. Additionally, I called and emailed to the central bank of the Ukraine to ask whether they had deposited any gold in New York in 2014 that could help explain the mysterious 31 tonnes gap. Until now, all four central banks were reluctant to say anything that could restore their common credibility, but perhaps one will in the future – still waiting on email reply from the central bank of the Ukraine.
There is enough evidence European countries, among others, are nervous about the security of their official gold reserves stored abroad – who wouldn’t be if unprecedented amounts of physical gold were moving to Asia while Western consultancy firms are clearly underreporting this trend. Accidentally there are more and more stories popping up that might be a backwash from the tension between the big custodians (FRBNY, BOE) and the gold owners.
This story about Belgium repatriating 200 tonnes from the UK, which was officially denied after a few hours by the NBB, makes the story of the Netherlands that bought 10 tonnes last December, which was also officially denied after a few hours, more suspicious. I hate to speculate, though our central banks and the impossibility of the numbers they put out force me to speculate – apparently there is no other option.
The fact the 31 tonnes gap is not being elucidated by the central banks in concert might signal these central banks have something to hide. If the custodians have something to hide, we can ask ourselves; did Belgium apply for withdrawing 200 tonnes of gold from the UK, but shortly after got a telephone call this request was not part of the range of possibilities? Or will the Belgians repatriate, but for security reasons don’t like the global press to know?
From January to December 2014 the Federal Reserve Bank Of New York (FRBNY) has been drained from 176.81 tonnes of physical gold out of the foreign deposit accounts. A drop from 6,195.60 tonnes to 6,018.79 tonnes over 12 months, FRBNY data published on Friday showed. The FRBNY doesn’t disclose how much is withdrawn by which central bank.
These numbers do not match the claims made in Europe about gold repatriated from the US. This is bad news.
On November 21, 2014, the Dutch central bank, De Nederlandsche Bank (DNB), surprised the world by stating they had in utmost secret repatriated 122.5 tonnes from their gold deposit at the FRBNY. Although not specifically disclosed by DNB, all the gold must have been repatriated in 2014.
Some simple math: 122.5 tonnes plus 85 tonnes is 207.5 tonnes; this is the amount DNB and the Bundesbank claim to have withdrawn from the vaults in New York. The FRBNY states it only delivered 176.81 tonnes to their European allies across the pond. The gap accounts for 30.69 tonnes; this is “the problem” the three central banks are now facing.
“The problem” adds to a range of events that happened since 2011 and fueled speculation about whether the FRBNY can fulfill all their gold obligations to foreign depositors.
Repatriating gold from New York in itself means the Europeans don’t trust the FRBNY as the custodian for their gold.
In 2012 the Bundesbank presented a schedule to ship home 150 tonnes from the US in three years (ending in 2015). In 2013 the Bundesbank changed their schedule to repatriate 674 tonnes from New York (300) and Paris (374) over seven years. Why did they change their initial schedule and why would it take seven years to hire a few planes to ship the gold from New York to Germany?
In 2013 the Bundesbank only received 5 tonnes from New York. That is very little gold given Germany should have safely stored more than 1,400 tonnes in nine compartments at the FRBNY. How hard can it be for the FRBNY to process a withdrawal request by a customer?
The first batch from New York, the 5 tonnes, was said to be recast into LGD bars before stored in Frankfurt, but the Bundesbank refused to disclose why. In any case, the origin of newly cast bars can’t be traced, that makes it impossible to know if it came from New York or someplace else.
During the recasting of the bars no independent external auditors were present.
50 of the 85 tonnes Germany repatriated from New York in 2014 were recast in LGD bars before stored in the vaults in Frankfurt. Again, no details were disclosed by the Bundesbank about bar numbers, nor was any independent party allowed to audit and assay the gold. For some reason the Bundesbank did mention the BIS was involved in an audit: “We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities”
Late January 2015 the IMF published an update of the foreign exchange reserves of the Netherlands that showed DNB had bought 10 tonnes of gold in December 2014. A few hours later DNB denied it had bought any gold, without elaborating on how the IMF got the false numbers. Kind of adventitious given everything mentioned above. Perhaps DNB did buy gold in 2014 because there was something wrong with the gold they repatriated from the FRBNY or they wanted to repatriate more, but weren’t allowed? Of course, this had to be carefully covered up. Any problem that would have occurred from repatriating gold from the FRBNY can never be openly discussed for it would destabilize the international monetary order.
The list goes on and on. Perhaps the latest data released by the FRBNY is a typo, perhaps 30.69 tonnes was shipped to Germany early January 2015 and the Bundesbank counted this as repatriated in 2014 to make the tonnage shipped home in 2014 look less worrisome compared to the tonnage DNB got back, perhaps there is a explanation for the gap in tonnage reported by both sides of the Atlantic. I surely hope so. In any case it’s very alarming the three central banks didn’t even take the simple effort to make it seem all the numbers add up.
I will call and email all three central banks on Monday to confront them with the current situation, although I doubt either will change any of their numbers. In my opinion there can only be three causes for “the problem”:
Someone is lying. That can be DNB, the FRBNY or the Bundesbank.
There has been a gold swap between the FRBNY and some other central bank. This other central bank (or BIS) would than have delivered 30.69 tonnes to Germany, in return it got a claim on gold at the FRBNY. But why? Such a scenario wouldn’t lift any concerns regarding the FRBNY’s gold obligations, au contraire. Besides, both DNB and the Bundesbank specifically meant to repatriate gold from New York, where according to official sources their gold is supposed to be.
UPDATE 8 PM GMT+1: Commenter “awgee” (read below) asked me if I failed to consider if a central bank, other than DNB or the Bundesbank, added gold to their stock at the FRBNY in 2014 which could explain the gap. The answer is I didn’t consider this, though it’s a very good point. If any central bank deposited approximately 31 tonnes in 2014 this would actually be the most obvious explanation for “the problem”. As far as my data goes back (1995), the last time a deposit was visibly made was in October 2011 (4 tonnes), and before that in February 1999 (3 tonnes). It doesn’t happen often, but it can happen. (as the FRBNY only discloses the total amount of gold in foreign accounts, we can only see deposits being made during a month with no withdrawals or during a month when deposits transcend withdrawals).
The number we all have been waiting for; The Federal Reserve Bank of New York (FRBNY), which is the custodian for parts of the official gold reserves of 36 nations and the IMF, e.g. The Netherlands and Germany, saw its inventory of foreign gold deposits drop by 47 tonnes in November 2014. Year to date the FRBNY has lost 166 tonnes. The FRBNY only publishes how much gold it stores in total for foreign nations and the IMF, not country specific.
The German central bank, the Bundesbank, or BuBa, first announced a gold repatriation program in 2012. BuBa then revised their program in 2013; it intended to repatriate 300 tonnes of gold from the US and 374 tonnes from France by the end of 2020. However, in 2013 they only received a meager 5 tonnes from the US and 32 tonnes from France. No worries though, said Carl-Ludwig Thiele from BuBa, in 2014 Germany aims to get 30 to 50 tonnes back from New York to remain on schedule.
Last November the Dutch central bank (DNB) surprisingly reported it had secretively repatriated 122.5 tonnes from New York. Quickly everybody in the gold space grabbed his or her calculator. If the Dutch got 122.5 tonnes from the FRBNY somewhere in between January and November, than how much should have been withdrawn in total from the FRBNY over this period, in order for Germany to remain on schedule? Now we know, based on official numbers: 166 tonnes was withdrawn in the first eleven months of this year, The Netherlands got 122.5 tonnes, which leaves 44 tonnes that Germany potentially got out of the vaults in Manhattan.
If the remaining 44 tonnes were all for sie Germans, this means Buba could be exactly on track to repatriate 30 to 50 tonnes this year.
Were both the dot-com bubble and housing bubble in the US preceded by large outflows of foreign gold deposits from the FRBNY?
The German central bank still has some explaining to do. How did the Dutch get 122.5 tonnes back in few months and do they take seven years to repatriate 300 tonnes?
Rectification: in this post I speculated The Netherlands repatriated 122.5 tonnes in two months (October and November 2014). This was obviously incorrect.
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