Is the Gold in Fort Knox Still There?

Recently, President Trump and Elon Musk pondered whether the gold in Fort Knox is still there.  It is not an unusual question and is of interest to many Americans.

As a former U.S. Mint Director, I often get asked this question. Why? The Director of the U.S. Mint has custodial responsibility over the United States' gold reserves. This has been the case ever since President Franklin Delano Roosevelt required Americans to turn in their gold money in 1933, transferred ownership of U.S. gold reserves from the Federal Reserve System to the U.S. Department of the Treasury, and directed the 28th Director of the Mint, Nellie Tayloe Ross, to build the U.S. Bullion Depository at Fort Knox (commonly referred to as just "Fort Knox") and be responsible for the custody of the gold.

In 1972, when President Nixon stopped allowing other countries to redeem their U.S. dollars for the equivalent amount of gold from the United States, many people wondered if the reason was that there was not enough gold to handle all the redemptions (true) or if there was no remaining gold (false), or if a secret government cabal had been secretly leased out or used in swap agreement to manipulate the gold market.  In an attempt to dispel any conspiracy theories, Mint Director Mary Brooks opened up Fort Knox to a tour by members of Congress.

Further, the General Accounting Office (the watchdog agency for Congress) worked with the U.S. Mint to audit all the gold in three of the 13 compartments inside the Fort Knox vault.  They did a physical inventory, weighing and assaying a sample of bars from each melt batch, verifying the accuracy of their inventory records, and reviewing and evaluating the adequacy of the internal controls of all 91,604 bars in the three compartments.  It was all overseen by a special audit committee that maintained physical control over the gold during the inventory.  

The committee was comprised of auditors from the GAO, the U.S. Department of the Treasury's Office of the Secretary and Bureau of Government Financial Operations, the U.S. Mint (which includes assayers), and the U.S. Customs Service.  The gold was then placed back into each compartment and sealed.

The GAO recommended that the Secretary of the Treasury task the Director of the U.S. Mint to perform a comprehensive audit of the remaining unaudited inventory using the same methods. Due to the sheer amount of gold to be audited and the enormous cost, the audit should be spread out over 10 years.  In 1925, the Treasury Secretary agreed, and each year, approximately 10% of all the unaudited gold was audited using the same methods and procedures used to audit the first three compartments.  Ten years later, in 1986, virtually all the gold in the custody of the Mint had been audited and placed under seal. Essentially, no discrepancies were found, with the audit revealing that out of 160 million troy ounces of gold, inventory was only off by 4/10ths of an ounce.

Since then, the annual audit consists of having the Office of the Inspector General (OIG) of the U.S. Department of the Treasury inspect the seals for any signs of tampering.  From 1993 to 2008, the OIG began auditing selected compartments and choosing a statistical sample of gold bars to be weighed and assayed by independent assayers. The total discrepancy from 2004-2008 was 0.0078 troy ounces, which is immaterial. Given the size of the gold reserves of the United States, the discrepancy needs to be at least $310 million to be considered material.

Needless to say, I believe that all the gold will be there and accounted for.  However, the American public will likely need to wait a long time to find out. Due to the sheer volume (147.3 million ounces in Fort Knox, 56 million ounces in the West Point Mint, 43.9 million ounces in the Denver Mint, 13.4 million ounces in the Federal Reserve Bank of New York, and 2,400 ounces on display at Federal Reserve banks), this audit could take years.  With a team of 19 people, it takes around six minutes to move, weigh, take assay samples, and restore a single bar.   A comprehensive audit of the 699,515 bars in the custody of the U.S. Mint (working 24 hours a day) would take around four years to complete.  It theoretically could get done in 6 months if the team expanded to 1,280 people working 24 hours a day, but the limited space at all three Mint storage facilities would make that impossible.  Either way, personnel costs would be around $53 million.  It would cost $232 to assay one bar and approximately $162 million to assay all the bars.  And it would cost $41 million to replace all the gold destroyed by the assay process.  The total estimated costs of a comprehensive audit would be approximately $256 million.

Now, Elon Musk is much smarter than I am, so I hope he can find a better, faster way to do it, but I am not optimistic.