A Rudimentary Lesson in Central Banking Gold Deception

Central Banking gold deception

The world of gold is one of the most opaque domains of the entire world, and despite rampant Central Banking gold deception, the majority of people blindly believe every single statistic printed by Central Banks about their gold reserves, including claims made by gold organizations, such as the WGC, beholden to global banking interests, that consistently issue statements about gold that are completely off-base and incorrect. In fact, I have never even been able to find a satisfactory explanation of a gold standard online or in an academic textbook despite the fact that one might assume that a straightforward explanation would be fairly easy to uncover.

Consequently, I am going to illustrate an extremely rudimentary lesson in Central Banking gold deception that may fall at the very bottom of the pyramid of gold deception, in an attempt to explain just how deep the rabbit hole goes. Anyone that has ever looked at the balance sheet of the US Central Bank knows that they have not listed the correct price for their “gold stock” for more than eighty-five years. Interestingly enough, if you search the internet for reasons why the US Central Bank lists its “gold stock” at a price of $42.22 per ounce, one of the top search results, provided by Quora, returns perhaps two of the most incorrect answers I have encountered regarding this issue. For some reason, Quora’s answers have secured a very high ranking in Google’s algorithm of search results, perhaps because the founders were two former Facebook employees, as certainly one would think that the lack of veracity in many of Quora’s provided answers to questions would earn them a low ranking in Google.

For, example, take a look at the top two answers posted on Quora in response to why US Central Bankers list gold on their balance sheet at $42.2222 an ounce.

The first answer mirrors former US Central Bank Chairman Ben Shalom Bernanke’s negative response to a question posed by former US Congressman Ron Paul on whether he believed gold is money, even though gold is the only money that has true intrinsic value and has a global history of being used as money that is thousands of years longer than any fiat currency, all of which have historically eventually collapsed to their intrinsic value of zero.

The second answer, seen below, by someone that lists his occupation as an asset manager and historian states that the $42.2222 listed price of gold per troy ounce on the US Central Bank balance sheet does “NOT” reference a statutory price, a falsehood that is easily disproved by simply investigating narrative written on the US Central Bank website.

To provide some background of what the “gold stock” listed on the US Central Bank balance sheet represents, one only needs to spend a few minutes on the website of the US Central Bank to uncover the answer, as follows.

“The Gold Reserve Act of 1934 required the Federal Reserve System to transfer ownership of all of its gold to the Department of the Treasury. In exchange, the Secretary of the Treasury issued gold certificates to the Federal Reserve for the amount of gold transferred at the then-applicable statutory price for gold held by the Treasury. Gold certificates are denominated in U.S. dollars. Their value is based on the statutory price for gold at the time the certificates are issued. Gold certificates do not give the Federal Reserve any right to redeem the certificates for gold. The statutory price of gold is set by law. It does not fluctuate with the market price of gold and has been constant at $42 2/9, or $42.2222, per fine troy ounce since 1973. The book value of the gold held by the Treasury is determined using the statutory price.”

However, I encountered an online explanation, when I researched the top search engine results provided for why the US Central Bank assigns the “gold stock” listed on its balance sheet an absurd price of $42.2222 per ounce, that contended that the US Central Bank’s refusal to market its “gold stock” to market prices was simply to avoid losing their claim to hundreds of millions of ounces of gold. The theory is provided below:

“Setting the official price at today’s level of $1,225 per ounce, the Fed’s $11 billion worth of gold certificates would constitute a claim on just 9 million ounces of the yellow metal ($11,000,000,000/$1225). That is, of the 261,498,927 ounces held at the Treasury, just 3.4% would now be earmarked to satisfy the Fed’s gold certificates. This would deprive the Fed of 96.6% of the ounces that had previously been stored on its behalf. The remaining 252 million or so ounces of gold would henceforth constitute the property of the U.S. Treasury.”

However, this explanation can be easily dismissed as incorrect by referencing the paragraph published above that exists on the website of the US Central Bank, on which it is explicitly stated that the certificates “do not represent a claim on any gold”, and that the gold certificates it lists as “gold stock” on its balance sheet merely represents an offsetting liability to the physical gold owned by the US Treasury (note that the explanation above was provided when the price of gold was $1,225 per troy ounce). Furthermore, this clarification of the rights of the gold certificates confirms this contention, also easily discoverable on the US Central Bank’s website:

Although the Federal Reserve does not own any gold, the Federal Reserve Bank of New York acts as the custodian of gold owned by account holders such as the U.S. government, foreign governments, other central banks, and official international organizations. No individuals or private sector entities are permitted to store gold in the vault of the Federal Reserve Bank of New York or at any Federal Reserve Bank.”

As of 9 October 2019, the US Treasury listed on its balance sheet gold holdings of 261,498,926.241 troy ounces, priced at $11.041 billion, at a price per troy ounce of $42.222 per troy ounce. This listed price of US Treasury gold, absent a few insignificant fluctuations, has been static for decades. The amount of troy ounces, if priced at the 9 October price of $1,507 per troy ounce would have been listed at $394.079 billion instead of its actual $11.041 billion listed price. The US Central Bank could easily list the market price of their gold certificates on their balance sheet, and with a simple accounting footnote, indicate that the certificates state a statutory price of $42.2222 per troy ounce that existed at the time they transferred ownership of the physical gold to the US Treasury. However, for transparency and disclosure, Central Bankers could choose to disclose the current market price of $394,078,881,845.18 without much effort. In fact, the US Treasury does exactly this, and on a 28 September document, they included a footnote that stated, “the market value of the gold reserves based upon the London Gold fixing, as of 28 September was $310.5 billion.”

So what gives? Basically, the explanation US Central Bankers provide for listing the price of their “gold stock” at $42.2222 per troy ounce on their balance sheet, during a time when the real market price is nearly thirty-six times higher, is something akin to the following. Because $42.2222 per troy ounce is the statutory price listed on the gold certificates, and since it’s written in ink, they don’t want to change the price assigned to the gold ounces, even though the price has been irrelevant for decades. As I’ve already stated, no banker would have to amend the original gold certificates to be honest about the aggregate price they represent. All they would need to do is list the market price and provide a footnote on their balance sheet, just as the US Treasury does, that explains the statutory price listed in the gold certificates. The explanation for their Central Banking gold deception simply makes no sense. For example, if an individual owned a stock portfolio, the monthly stock portfolio statements issued to the portfolio owner will list the purchase price (original stock cost) month after month after month for years on end. Can you imagine if you received portfolio statements from your investment firm every month, in which your portfolio value remained static for year after countless year, simply because your portfolio manager explained to you that the best way to understand the aggregate value of your portfolio was to use the original purchase price of the stocks?

So what gives? The Central Banking gold deception sinks deeper into the rabbit hole when one notes the following statement on the US Central Banking website:

“A small portion of the gold held by the U.S. Treasury (roughly $600 million in book value)–about five percent–is held in custody for the Treasury by the Federal Reserve Banks, as fiscal agents of the United States. The vast majority of this gold is located in the vault at the Federal Reserve Bank of New York, and a very small portion is on display in several Federal Reserve Banks. The remaining 95 percent of U.S. Treasury gold ($10.4 billion in book value) is held in custody for the Treasury by the U.S. Mint.”

However, since 5% of the gold held by the US Central Bank is physical bullion, coins and blanks, NOT paper gold certificates, in the form of about 13.452M AuOzs as of 30 September 2019, surely the bankers will list physical gold assets on their balance sheet at their real market price and not the carrying value (book value) of its statutory gold certificate price of $42.2222 per troy ounce, right? Wrong. Even for its physical, not paper, gold holdings, the US Central Bank marks these holdings at a price of $42.222 per troy ounce. Why not mark physical gold prices to market every month? Even gold mining companies do not mark their inventories to the price of gold at the date they mined it and leave it static, but they mark their inventory to current market prices. Since the market price of the roughly 13.452M AuOzs the US Central Bank held for the US Treasury was roughly $20 billion at the end of September 2019, it makes no sense why they insist on listing these physical gold holdings at little more than $568 million, as they did, with no footnote even explaining that the $568 million of physical gold holdings was priced at $42.2222 an ounce.

To conclude this article, I will lead you with the disclosure of the locations of the US Treasury gold.  The only gold that has ever been observed by the public is the portion classified as working stock gold, or the portion of US Treasury gold that comprises only 1.12% of its entire holdings. In the below graphic, I stated that no one really knows where this gold is held, even though the locations are provided as Denver, West Point and Fort Knox, because no third party, independent of the US Treasury and the US Central Bank, has ever observed any of this deep storage gold and no photographic evidence of the deep storage bars has ever been released. Consequently, with no evidence of its existence ever provided by an independent third party, no one really knows if it is actually there.  

deep storage gold held at the US mint

For example, Russia has reported that the vast majority of its gold reserves are vaulted in Moscow, with the remainder stored in vaults in St. Petersberg and Yaketerinburg. Though the exact locations of the vaults have never been disclosed, the two photos released by these Russian vaults for public consumption display far more gold bullion than any photo every released by any US Mint vaulting facility.

Russian gold vaults
vaulted Russian gold bullion

And there you have it. One of the most basic expositions of Central Banking gold deception on a very rudimentary level that keeps spiraling deeper down the rabbit hole the more one digs.

J. Kim

3 thoughts on “A Rudimentary Lesson in Central Banking Gold Deception

  1. Thanks for the article

    I would like to know your thoughts on the value currently showing on gold and silver billions, such as the Perth Mint issued Australian Silver Koalas, Gold Kangaroos etc..
    All showing ridiculous face values

    1. Just part of the banker deception. If you follow my IG account maalamalama.wealth.education, there’s a post that discusses this topic in detail. Thanks for your comment and have a great day.

  2. Thanks for the article

    I would like to know your thoughts on the value currently showing on gold and silver bullions, such as the Perth Mint issued Australian Silver Koalas, Gold Kangaroos etc..
    All showing ridiculous face values

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