There Is No Proof All Gold Is In Fort Knox
This post is a sequel to A First Glance At US Official Gold Reserves Audits and Second Thoughts On US Official Gold Reserves Audits.
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:
- * 1974 audit (released by the GAO 2/10/1975)
- * 1977 audit (released by the GAO 5/5/1978)
- * 1981 audit (and 1980 summary, released by the GAO 10/1981)
- * 1985 audit (released by the OIG 4/25/1986)
- * 1986 audit (released by the OIG 4/24/1987)
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.
*In 1977, presumably, one bar in every fiftieth melt (one melt is approximately 20 bars) was assayed, irregularities were found in two melts, “the vault had to be opened twice more in the presence of the Joint Sealing Committee and the gold reevaluated”. The assayer is unknown and 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.