The Confusing American “Gold Puzzle” Plays Dead

According to the 2007 charts, U.S. gold exports for that year reached 2,150 tons, which means that between 2007 and 2008, the U.S. exported a total of 5,070 tons of gold, totaling 62 percent of its gold reserves and 24 times the amount of gold mined annually. Where does such a huge amount of gold originate?

Since last year, many international voices have called on the U.S. to undersell its gold reserve in order to deal with its increasing governmental debt. Though the U.S. government continues to reject the idea, the public has noticed that much U.S. gold has been exported. The U.S. “Gold Puzzle” truly confuses the people.

The U.S. government insists it does not and will not sell its gold.

The Bretton Woods Agreement, dating to December 27, 1945, confirmed that U.S. dollars based on gold would be the major international reserve currency and that 1 ounce of gold was valued at $35. The U.S. dollar, as the major international reserve currency, was directly related to the price of gold; thus, every country’s currency was related to the U.S. dollar and could be exchanged into gold based on the figuring that $35 was equivalent to 1 ounce of gold. This was called the U.S. gold standard. The U.S. met each country’s request to convert their reserves in U.S. dollars into gold. Later, with increasing international trade, countries like the United Kingdom, France, Germany and Italy accumulated wealth and attempted to buy back gold from the United States. This, in addition to events such as the pound crisis and the escalation of the Vietnam War, caused a gold run, eventually bringing the Bretton Woods Agreement to an end.

In August 1971, the Nixon administration officially recanted the equivalency of $35 to one ounce of gold because of unmanageable flexibility.

Reports indicate the U.S. Department of Treasury has 261.5 million ounces (about 8,133 tons) of gold, making its reserves the largest in the world. Since the Great Depression, the U.S. government has been sitting on this wealth, producing no benefit. If calculated based on the current value of $1,515 per ounce, the U.S. has gold assets worth $396 billion dollars.

With recent U.S. governmental debt almost reaching its limit, some market participants have suggested that the U.S. government sell some of its gold reserves or other mortgage assets that could pay the debt. This could defer the possible debt crisis. The U.S. government, however, has no such intentions; the U.S. Secretary of the Treasury Timothy Geithner indicated in one of his letters to Congress that any selling of assets would be harmful to the economy and financial market and would damage market confidence in the U.S.

Gold is widely used in public and private asset reserves; both present and potential investors regard gold as a long-term reserve asset. Many private banks, monetary institutions and even some international organizations use gold as a major reserve. An official reserve undersell or potential undersell could possibly cause fluctuations in market prices, which would no doubt affect investors’ market behavior directly. It is because of this pivotal function of gold that the U.S. government is so cautious toward selling it, which is reasonable.

Has the gold reserve been sold out?

In some ways, the U.S. government is very strict with gold; however, some strange things have been noticed in the market. The U.S. Mining Industry Report, published periodically, keeps a detailed account of U.S. importation and exportation of precious metals, including gold. In 2009, the statistic returns of the report indicated that the export of U.S. gold in 2008 was as high as 2,920 tons. The wording of the report here referred to “gold compounds.” Analysts pointed out that gold compounds refer to gold or a gold equivalent. The puzzle is that the U.S. government has 8,100 tons of gold reserve and annually mines an additional 228 tons, making the 2,920 tons exported a significant amount at 36 percent of U.S. gold reserves and 14 times the amount of gold mined annually.

In addition, according to the 2007 charts, U.S. gold exports for that year reached 2,150 tons, which means that between 2007 and 2008, the U.S. exported a total of 5,070 tons of gold, totaling 62 percent of its gold reserves and 24 times the amount of gold mined annually. Where does such a huge amount of gold originate?

Of course, the final possibility is that these figures are false. Some people say one cannot have good faith on the issue of gold. Although the U.S. asserts that it has over 8,000 tons of gold, this quantity has not been audited since the 1950s, following Eisenhower’s term as president.
Creaders, China

Translated By Liangzi He

10 June 2011

Edited by Emily Sicard
China – Creaders – Original Article (Chinese)

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