Marking the Field: US Stated Gold Reserves and Gold Held at the Fed – World Gold and Gold Swaps

The US Treasury says that it holds 261,499,000 fine troy ounces in its international reserves.

The gold is valued on the books at $42.2222 per fine troy ounce. This represents a total value of $11,041,063,078.

Since there are 32,150.7466 troy ounces in a tonne, the US Treasury has 8,133.53 tonnes of fine gold on its books.  Note that the number as presented on a copy of the official US Treasury statement shown below includes ‘gold swaps.’

A discussion of the procedures and nature of gold swaps and loans by the IMF ishere.

Most of the gold reserves of the US are stored at the US Bullion Depository, also know at Ft. Knox.

Current Report: April 30, 2013

Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury’s Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called “Bullion Reserve” or “Custodial Gold Bullion Reserve.”

Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about 1 percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called “PEF Gold.”

Last Updated:  March 21, 2013 

According to the September 30, 2012 audit, the Federal Reserve holds 13,452,810.532 fine Troy ounces (FTO) of gold bullion in its vaults, almost all at the Federal Reserve Bank of NY.

This is 418.43 tonnes.

The gold belongs to the US Treasury. The Fed owns no gold.

The Federal Reserve Bank of New York is said to hold approximately 7,000 tonnes of gold in its vaults, most of it in custody for foreign governments and banks, and international institutions.

Below is the September 2012 accounting of the Treasury gold held in vaults and on display at the Federal Reserve banks.

“The Federal Reserve Bank of New York holds 99.98% of the total United States-owned gold bars and coins held by FRBs within its vault. The remaining 0.02% of the United States-owned gold bars and coins held by FRBs are on display at the Federal Reserve Banks of Richmond, Atlanta, Kansas City, Minneapolis, San Francisco, New York and Dallas.”

The Fed does hold gold certificates on its books.   They were given in exchange for the transfer of gold held by the Fed to the US Treasury in 1934.

With regard to the Fed’s Gold Certificates here is some history by way of explanation:

Acting under this authority [the Emergency Banking Act of March 9, 1933], the secretary of the Treasury issued orders dated December 28, 1933, and January 15, 1934, the latter requiring all gold coin, gold bullion, and gold certificates to be delivered to the Treasurer of the United States on or before January 17, 1934.

A new type of gold certificate, series of 1934, in denominations of $100, $1,000, $10,000, and $100,000, was issued only to Federal Reserve banks against certain credits established with the Treasurer of the United States. These certificates are not paid out by Federal Reserve banks and do not appear in circulation. They bear on their face the wording: “This is to certify that there is on deposit in the Treasury of the United States of America dollars in gold, payable to bearer on demand as authorized by law.”

Gold certificates, however, have not been printed since January, 1935. Under the Gold Reserve Act of January 30, 1934, all gold held by the Federal Reserve banks was transferred to the U.S. Treasury, in accordance with Presidential Proclamation of January 31, 1934, the former receiving the gold certificate credits on the books of the Treasury at the former statutory price for gold $20.67 per ounce.

Gold assets were valued at $35 per fine troy ounce, giving effect to the devaluation January 31, 1934, until May 8, 1972, when they were revalued at $38 pursuant to the Par Value Modification Act, P.L. 92-268, approved March 31, 1972. The increment amounted to $822 million.

Gold assets were subsequently revalued at $42.22 pursuant to the amendment of Section 2 of the Par Value Modification Act, P.L. 93-110, approved September 21, 1973. This increment amounted to $1,157 million. All of the U.S. Treasury’s monetary gold stock valuation, including the preceding revaluation increments, has been monetized by the U.S. Treasury by the issuance to the Federal Reserve banks of $11,160,104,000 for their gold certificate account (total as of close of 1980). In addition, the U.S. Treasury monetized $2,518 million (as of close of 1980) of the U.S. special drawing rights by issuance to the Federal Reserve banks for their special drawing rights certificate account.

On the books of the Federal Reserve banks, neither the gold certificate account nor the special drawing rights certificate account plays any restrictive role in Federal Reserve banks’ operations. With the U.S. losing monetary gold in recent years of balance-of-payments deficits, causing decline in gold certificates (credits), two restraints were eliminated: P.L. 89-3, March 3, 1965, eliminated the requirement contained in Section 16 of the Federal Reserve Act for the maintenance of reserves in gold certificates by Federal Reserve banks of not less than 25% against Federal Reserve bank deposit liabilities; and P.L. 90-269, March 18, 1968, eliminated the remaining provision in Section 16 of the Federal Reserve Act under which the Federal Reserve banks were required to maintain reserves in gold certificates of not less than 25% against Federal Reserve notes.

Gold certificates (credits) held by the individual 12 Federal Reserve banks, therefore, merely reflect the total of monetary gold held by the U.S. and also the individual Federal Reserve bank holdings of gold certificates (credits) to their credit on the books of the INTER-DISTRICT SETTLEMENT ACCOUNT.

Nevertheless, both the gold certificate account and special drawing rights account at Federal Reserve banks were utilized as eligible assets to serve as part of the 100% collateral pledged with the Federal Reserve agent at each Federal Reserve bank for issues of Federal Reserve notes. (The Depository Institutions Deregulation And Monetary Control Act Of 1980 removed the collateral requirements for Federal Reserve notes held in the vaults of Federal Reserve banks.)

Encyclopedia of Banking & Finance (9th Edition) by Charles J Woelfel

There has been much speculation provoked primarily by GATA that the Fed has engaged in gold swaps on behalf of the Treasury.  Some of this was sparked by a reference to ‘gold swaps’ in FOMC minutes.

There is some thinking that gold owned by other countries and held in custody by the Fed has been ‘re-hypothecated’ in gold swaps and leases to bullion banks and sold into the private marketplace.   And there is some thinking that the gold has been used as collateral in multiples as is the current fashion in financial circles.

A request under the Freedom of Information Act provided some documents, and a denial of information for certain ‘intra-agency documents’ as cited in this letter from the Fed here.

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (seehttp://www.federalreserve.gov/aboutthefed/bio…board/warsh.htm), formerly a member of the President’s Working Group on Financial Markets, detailed the Fed’s position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: “In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve’s Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See http://www.gata.org/node/1181.)

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