Review of US Bullion Depository (Fort Knox) gold audits - plenty of flaws

roadrunner

https://www.bullionstar.com/blogs/koos-jansen/us-mint-releases-new-fort-knox-audit-documentation-the-first-critical-observations/

KJ was persistent in FOIA requests to get the USMint to release 20 years of Fort Knox gold audit information. After forking over more than $3,000 (via go fund me) he cleared an entry bar most people wouldn't consider doing. While nothing earth shattering here, some of the findings are interesting. For instance after telling him 1200 pages of documents would need to be dug out (at $60/hr admin time) the Mint came up with an estimated fee likely to scare away most anyone attempting to do this. In the end, KJ received a couple hundred pages of documents, many duplicates, redactions, many useless things he didn't even request....and dozens of audit pages missing. This is the best our tax dollars can produce?

End result was that the auditors are far from top notch professionals. In two specific instances they had the "official" scale set on pounds rather than troy ounces and had to redo everything. In another situation they miscounted 10 ounces of gold bar drill samples as only 1 oz (they had the decimal point in the wrong place because the display was not clear). Because of that error they had to reopen a sealed vault (OJS). Worth a read if you have a spare 30 minutes or so as it gives a peek into goings on.

1630Boston

Thanks for posting this info

derryb

audits are rarely independent. First question I always ask is "who's paying the auditors?"

roadrunner

In this case most if not all of the "auditors" are employees of the US govt.

bronco2078

how hard can it be to audit an empty vault?

rawteam1

@bronco2078 said:
how hard can it be to audit an empty vault?

Bout the same as the Emperor's tailor...

roadrunner

@bronco2078 said:
how hard can it be to audit an empty vault?

"Inventorying" a vault via the OJS method (official joint seal) is essentially the same thing. You're "assuming" that whomever sealed the vault last, did it right, and everything is untouched. Anytime I've done an inventory over the past 40 yrs from Top Secret material (every page in every publication was checked) and equipage (every piece of outdated and worthless items were counted)... there were no short cuts or "vault seals." I recall one time back in the early 1980's when the previous crew dumped a near junk manual 1960's type writer over the side. During the next equipment check heads rolled over that $20 item....some came out a pay grade lower.

derryb

Former Mint Director Ed Moy weighs in

There are actually four US gold vaults.

roadrunner

@derryb said:
Former Mint Director Ed Moy weighs in

There are actually four US gold vaults.

No doubt Mr. Moy has seen "some gold" at Fort Knox. What I'm almost certain of is that he is not seen all 446,698 bars of gold inventoried at Fort Knox in the 15 different joint sealed gold vaults. Even more important, he is not privy to the gold bullion sale/leasing transactions of the past 20 years. Even if every inventoried ounce is there....who actual has legal claim to it is not the same as who is the custodian.

According to what KJ found on the US Mint documents is that the no actual inventorying of gold has been done since 1998. It's been verification of Joint Seal Certificates. It's been 64 years since the gold was last fully inventoried.

To satisfy critics, a new audit would document each bar like the 1953 audit and assay 100 percent of the gold bars. That would require 400 people working full-time for six months to drill holes in each bar, test them for purity and document properly. The cost would range between $15 million and $60 million. The vaults would be sealed again until another public outcry.

That's ridiculous. You could simply inventory all the bars. Randomly weigh 5-10% of them. Randomly drill 1-2% of them. Such an evolution would not take near the manpower and still be a full blown legitimate audit of what's in there. Conducting an audit should also include inspecting US Treasury/Fed/Govt gold leasing/sale documents since the last inventory to identify who the owner(s) of the 261.5 MILL ounces are. That's like inventorying a Home For Sale without looking at the deed to see if the seller/custodian/squatter actually owns it. A couple years ago I offered to do a legit Fort Knox audit for $1 MILL with a team of 10 people (US Treasury directly pays for the fineness testing). No one from the US Mint has contacted me....lol. Since Fort Knox is where the controversy keeps pointing....just do a full count at Fort Knox which would cut down the audit expense by 45%.

cohodk

Roadrunner, you know the pundits would still cry foul if only a few percent of the gold bars were tested.

ricko

There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

derryb

GATA raised the question in 2008 with this $264,000 full page ad in the Wall St. Journal.

derryb

“good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.

Fort Knox is supposedly filled with 400 oz. "good delivery" gold bars. Each and every bar there should be assayed in a full, independent audit.

ShadyDave

@roadrunner said:

@derryb said:
Former Mint Director Ed Moy weighs in

A couple years ago I offered to do a legit Fort Knox audit for $1 MILL with a team of 10 people (US Treasury directly pays for the fineness testing). No one from the US Mint has contacted me....lol. Since Fort Knox is where the controversy keeps pointing....just do a full count at Fort Knox which would cut down the audit expense by 45%.

Hahah, next time I see you...you need to tell me about this.

cohodk

@ricko said:
There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

You can't think of any other reasons?

Maybe we should start at the reason why it should be audited.

derryb

@cohodk said:

@ricko said:
There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

You can't think of any other reasons?

Maybe we should start at the reason why it should be audited.

Because the People that actually own it have a right to know if they are being lied to about its status.

cohodk

@derryb said:

@cohodk said:

@ricko said:
There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

You can't think of any other reasons?

Maybe we should start at the reason why it should be audited.

Because the People that actually own it have a right to know if they are being lied to about its status.

Isn't there a record stating that it's all there?

ricko

@cohodk...It isn't necessary to think of other reasons... that is sufficient. Cheers, RickO

ShadyDave

@cohodk said:

@derryb said:

@cohodk said:

@ricko said:
There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

You can't think of any other reasons?

Maybe we should start at the reason why it should be audited.

Because the People that actually own it have a right to know if they are being lied to about its status.

Isn't there a record stating that it's all there?

All of Bernie Madoff's clients records stated the same as well...

cohodk

I hope the gold isn't there.

cohodk

@ShadyDave said:

@cohodk said:

@derryb said:

@cohodk said:

@ricko said:
There are sampling standards set by the government (Mil-Std-105A) that can be used for testing. They work very well. The only reason I can imagine for the reluctance to audit/inventory the gold is that someone KNOWS there is not the amount claimed. I am not a conspiracy theorist, in fact I abhor that sector... however, this situation certainly has begun to raise legitimate concerns. Cheers, RickO

You can't think of any other reasons?

Maybe we should start at the reason why it should be audited.

Because the People that actually own it have a right to know if they are being lied to about its status.

Isn't there a record stating that it's all there?

All of Bernie Madoff's clients records stated the same as well...

Is that supposed to be an analogy?

bronco2078

The gold is all there I saw it Just the other day while watching Goldfinger .

derryb

@cohodk said:

Isn't there a record stating that it's all there?

You mean like a paper promise?

cohodk

@derryb said:

@cohodk said:

Isn't there a record stating that it's all there?

You mean like a paper promise?

Like who gives a fart.

rawteam1

There's are maybe at least 12 Sacajawea $1 coins in there ... maybe... prolly some paper I suppose also...

dpoole

"Like who gives a fart."

The way to think about this. then:

What's the point of NOT being transparent?

roadrunner

@rawteam1 said:
There's are maybe at least 12 Sacajawea $1 coins in there ... maybe... prolly some paper I suppose also...

I suspect there are millions of "gold" presidential "dollars" in "ballistic roll form" as well.

roadrunner

Since someone mentioned gold leasing above. Gold swaps/options used to be reported individually on the govt's Officer of the Comptroller of the Currency (OCC) quarterly derivative's report. With gold being moved to Tier 1 currency status a few years ago, the OCC took advantage of that to "lump" gold derivatives into the same number as the Currency derivatives. "Other precious metals (silver/pall/plat, etc) are still reported as their own group.

So now $200-300 BILL in US gold derivatives are a rounding error among $30 TRILL US Forex derivatives. While perusing the BIS semi-annual derivative's report I noticed you can still get the gold global deriv's number for the reporting world bank gold derivatives. That's currently $354 BILL notional (equiv to 9,000 gold tonnes) out of $73.6 TRILL in global currency derivs. Assuming total leverage that covers about 2X to 4X the world's above-ground gold supplies. The highest number ever recorded for US only gold derivs was $600-$650 BILL back in 2008. Following the 40% haircut the BIS applied in Dec 2008 (shifting acctg methods from marked to market to marked to maturity) these "look" a lot smaller today.

http://www.bis.org/statistics/derstats.htm

cohodk

@dpoole said:
"Like who gives a fart."

The way to think about this. then:

What's the point of NOT being transparent?

What is the transparency of other countries?

bronco2078

@cohodk said:

What is the transparency of other countries?

Who cares about other countries transparency or lack thereof? I live here . If gold no longer matters as a monetary instrument then send Geraldo in there to open the vault on live TV and when its empty no one will even care.

roadrunner

We don't care about countries with minimal gold....many of them only have from 1-50 tonnes. I think half of the world's nations have some sovereign gold holdings. Transparency among the top dozen or so holders (500 tonnes or more held) that actually have a competitive currency are the ones that matter (US, UK, France, Germany, Italy, Swiss, China, Russia, Brazil, Japan, Mexico, Peru, Australia, Argentina, India, etc.). Really the top 6-10 currencies. Canada really doesn't have any gold left....they sold nearly all of it. UK only has about 400 tonnes that they claim.

If gold no longer matters as a monetary instrument....let the CB's sell it all and have it become basically an industrial only metal....assuming that most of the people will buy into that and dump theirs as well. Considering that between China and India, the public probably holds as much gold as the world's central banks, that will be a tough one. China's CB has tripled their gold holdings since 2003 (600 to 1800 tonnes). Someone should tell them to be more transparent as to what they're doing.

ricko

Someone once said... "Gold has never been worth nothing.".... To add to that, it never will be worth nothing. Cheers, RickO

cohodk

@bronco2078 said:

@cohodk said:

What is the transparency of other countries?

Who cares about other countries transparency or lack thereof? I live here . If gold no longer matters as a monetary instrument then send Geraldo in there to open the vault on live TV and when its empty no one will even care.

What if no countries had any gold? Would that make a difference?

derryb

The fact that many countries and central banks see the need to hold gold reserves makes a big difference. Unlike foreign currency reserves that they need to conduct trade, they hold gold for other reasons. What might those reasons be? Probably the same reasons most here own gold.

cohodk

Roadrunner, as you state, "Canada really doesn't have any gold left", what effect had this had in their currency, or more importantly, how has the standard of living in Canada been adversely effected?

Also, how do we know China has been increasing reserves, because of a report? Well, isn't there a report that says how much gold the USA has? Are we going to pick and choose which reports we wish to believe to support a narrative?

CaptHenway

If all of the U.S. Gold reserves were re-melted, re-assayed, re-cast into bar form and re-inventoried before being re-sealed into vaults, there are certain people who would still scream that it was stolen or adulterated before the vaults were re-sealed

derryb

@CaptHenway said:
If all of the U.S. Gold reserves were re-melted, re-assayed, re-cast into bar form and re-inventoried before being re-sealed into vaults, there are certain people who would still scream that it was stolen or adulterated before the vaults were re-sealed

Then why is it so secretive?
They've never lied to us before.
Of course the banks want us to believe our money is in their vault, but we know they loaned out 90% of it.

roadrunner

@CaptHenway said:
If all of the U.S. Gold reserves were re-melted, re-assayed, re-cast into bar form and re-inventoried before being re-sealed into vaults, there are certain people who would still scream that it was stolen or adulterated before the vaults were re-sealed

Those are the people that should be forced to do the audits. They won't ever complain again after moving the better side of 1 MILLION 400 oz gold bars back and forth.

cohodk

@derryb said:

@CaptHenway said:
If all of the U.S. Gold reserves were re-melted, re-assayed, re-cast into bar form and re-inventoried before being re-sealed into vaults, there are certain people who would still scream that it was stolen or adulterated before the vaults were re-sealed

Then why is it so secretive?
They've never lied to us before. ![]that's why we have the world's mlargest and most sophisticated military.(https://us.v-cdn.net/6027503/uploads/editor/dl/xjznjdtjgzrp.gif "")
Of course the banks want us to believe our money is in their vault, but we know they loaned out 90% of it.

Let's suppose this is true and we never get paid back. Maybe that's why we have the world's largest and most sophisticated military. Maybe the best thing that could happen is that we don't get paid back. Gee, we could travel the world without needing a passport. Whoohoo.

Baley

Schrodinger's vault: if you never open it up, the gold is simultaneously both there and not there.

rawteam1

It may be deemed genius to loan out worthless hunks of phantom or possibly real metal and get immeasurable amounts of working capital that actually creates a bunch of stuff that also creates more capital and so on...

jmski52

It's all about perceptions, indeed.

ricko

Yes, we perceive money (FRN's ) to have value, therefore we trade it for goods and services. Cheers, RickO

TwoSides2aCoin

Met my first Drill Sergeant there. It was all about brass, during my stay.

CaptHenway

@TwoSides2aCoin said:
Met my first Drill Sergeant there. It was all about brass, during my stay.

My oldest brother was there in the Fall of 1966 after he did his Basic at Ft. Leonard Wood. The Army in its infinite wisdom taught him to be a radio operator, even though he was color blind and could not tell one wire from another.

derryb

Wall Street Journal: “The Fed Has 6,200 Tons of Gold in a Manhattan Basement – Or Does It?”

ricko

I try to avoid the tin foil hat crowd and theories..... however, the lack of accounting/audits of the gold for this amount of time does give one pause........ Cheers, RickO