The Fort Knox Question

By David Liechty

Question from a Solari Report Subscriber:

Is there gold in Ft Knox? – Who does it belong to? – Are the bars real or phony?

According to the U.S. Mint website, the U.S. Bullion Depository at Fort Knox , Kentucky currently holds 147.3 million ounces of gold, held at a book value of $42.22 per ounce. The website claims that no gold has been transferred in or out of the Depository “for many years”, other than “very small quantities used to test the purity of gold during regularly scheduled audits.” It also indicates that the highest volume of gold held there was 649.6 million ounces, held on December 31, 1941.

Much of the gold originally stored in the Depository was obtained by the Federal Reserve under the provisions of Executive Order 6102, and the Depository was built to house this gold. The coins obtained were simply melted and made into 400-ounce bars of 0.900 purity, rather than being purified into 0.999 fineness, and the Depository holds 400-ounce bars of both 0.900 and 0.999 fineness. To the extent that Executive Order 6102 was valid, ownership of the gold passed to the Federal Reserve. Rumors of gold swaps and leases using this gold, however, makes the precise legal ownership of the bars potentially uncertain.

Various reports suggest that much of the gold in the Depository has been removed, even beyond the drop from 649.6 million ounces (20,204 metric tons) in 1941 to the current 147.3 million ounces (4,581 metric tons). James Turk reported that “In the 1970’s a very courageous gentleman named Edward Durrell claimed that substantially all of the US Gold Reserve being stored at Ft. Knox was gone. Only 1,000 tonnes or so of the 8,500 tonnes supposedly being stored there remained. The rest had been secretly taken from Ft. Knox and shipped to London in 1967 and early 1968 for sale by President Johnson in an ill-fated attempt to keep the price of Gold at $35 per ounce.” We Have A Right To Know

The actual full amount and quality of gold held in the Depository has not been confirmed by a third-party auditor since the Eisenhower administration. Ron Paul’s bill to audit the Federal Reserve would include an audit of the gold in the Depository, as it is held as an asset on the Fed’s balance sheet. Others, including James Turk, have also called for a full audit of the gold held in the Depository. Such an audit would include both physical verification and assaying of the purity of the bars held there.

Counterfeit 400-ounce gold bars with tungsten cores have been known since at least the 1980s (Precious metals 1982), and a recent report from Germany showed a 500-gram gold plated tungsten bar discovered at a major foundry. The Ethiopian Central Bank also attempted, unwittingly, to sell steel-cored gold bars to South Africa (Fake fears over Ethiopia’s gold) in 2008, but these lighter-weight bars were detected quickly and returned.

In October of 2009, Rob Kirby of Kirby Analytics reported that a Hong Kong depository had received 60 metric tons of “Good Delivery” standard gold bars that were actually gold-plated tungsten. Tungsten’s density almost exactly matches that of gold, and it is much more difficult to detect. In a subsequent article, “The Genesis of the Gold-Tungsten: The Rest of the Story“The Genesis of the Gold-Tungsten: The Rest of the Story”, and without giving sources, Kirby laid out the full story of these bars. He alleged that between 1.3 and 1.5 million 400-ounce tungsten bars were obtained from Eastern Europe in 1991-92 as spoils of the Cold War, that these were shipped to Panama, air-lifted to Mena, Arkansas, and finally trucked to a refinery in Southern California to be plated with gold and stamped.

Kirby claims that 640 thousand of these 400-ounce tungsten/gold bars were then trucked to the Depository in Kentucky and exchanged “with ‘what ever was left’” in there, “which was [then] stolen outright.” Ten thousand metric tons of the 400-ounce tungsten/gold bars were also earmarked for the international market, and were “papered” through a holding facility in Vancouver, trucked back to Mena, Arkansas, and air-lifted to Panama for distribution. Kirby alleges that the gold hedging/lending process was specifically created to hide the movement of these ten thousand metric tons of counterfeit bars into the international market.

Other than this report by Kirby, there is no primary source material available to corroborate his story, although it has been picked up and discussed in various news and blogosphere outlets (The “Tungsten-Filled Gold Bar” Conspiracy Gets Discussed On CNBC ; MYSTERY: Why Did GLD’s Published List Of Gold Bars Shrink ). A good discussion of the article can be found here.

Kirby also indicates that Chinese officials detained the parties responsible (see “On Doing God’s Work” ), and perhaps they were the proprietors of Chinatungsten, which offers “tungsten alloy for gold substitution”; see also here.

Without additional verification, such as a comprehensive audit, we will likely never know the full truth about Kirby’s allegations.

Related reading:

“The U.S. is the Saudi Arabia of Gold”
maxkeiser.com (16 Oct 10)

Should Germany Worry About Leaving Its Gold With U.S.?
GATA (16 Oct 10)

Bundesbank Confirms Germany’s Gold Is In Play
GATA (24 Aug 10)

Uncle Sam’s Mysterious Hoard
The Atlantic (Nov 2010)