- by Sarah Lovren…
The United States is currently the number one stockpiler of gold in the world with a total of 8,134 tons as of the second quarter of 2018. Since former President Richard Nixon took the U.S. Dollar off the gold standard in August of 1971, stockpiles of gold have grown, while historically, the dollar’s value has generally decreased.
The Federal Reserve has helped cause this erosion in value through less than stellar fiscal policies. One of these is the cancellation of international convertibility of the U.S. Dollar into gold.
Despite this, the U.S. remains the largest holder of gold reserves, with Germany and Italy in 2nd and 3rd place, respectively. It also maintains one of the highest gold allocations as a percentage of its foreign reserves at 74.9%.
This makes the country second only to Tajikistan, where the metal accounts for more than 88% of foreign reserves.
U.S. gold reserves are located throughout the country, with the largest stockpiles of minted gold in Fort Knox, Kentucky, in addition to U.S. Mint facilities in Denver, Colorado and West Point, New York.
According to the latest Department of the Treasury report, the Fort Knox deep storage reserves are the largest at 147,341.858.382 Fine Troy Ounces (t oz), or the equivalent of 5,051 tons. Meanwhile, West Point contains 54,067,331.379 t oz (1,853 tons), and Denver has 43,853,707.279 t oz (1,503 tons). Gold bullion reserves, on the other hand, are held at the Federal Reserve Bank vaults in New York, where they weigh in at 13,376,987.724 t oz (458 tons). With book value estimated at $42.2222 per Fine Troy Ounce, the total book value of all US Government gold reserves throughout the country is at $11,041,059,957. This includes all mint, bullion, working stock, gold coins, blanks and other miscellaneous.
Gold production in the United States began as early as 1775 in what is known today as southern California. The famous gold rush of 1849 at Stutter’s Mill was sparked by the discovery of large gold deposits. This then fueled unprecedented gold production in the country. A period of economic growth followed, and by 1917, gold production exceeded 4 million t oz per year. With production fluctuating between 2 and 4 million t oz during the inter-war years, the years following World War II through 1983 saw domestic production that did not exceed 2 million annually.
Since the early 1980s, however, production has steadily increased by over 1 million every year, with the World Gold Council revealing that a total of 190,040 tons have been mined worldwide throughout history. The U.S. is fourth in worldwide gold production with an estimated yearly production of 245 metric tons (270 tons) in 2017 and the largest stockpile in the world.
The accumulation of gold throughout and post-World War II, when European counties paid their war provision debts in gold, allowed the U.S. to increase its gold stockpiles immensely. It also secured America’s role as the leader in today’s financial and economic world. At the time, the gold for debt arrangement facilitated the expansion of the dollar base, without the need for a matching increase in gold reserves. When the world economy took a downward turn in the early 1970s, more countries demanded gold to replace their U.S. dollar holdings as a means to stave off more economic recession.
When Nixon realized that the U.S. could not meet its dollar obligations, the U.S. replaced gold with faith in its economy and future prospects. Recently, after years of historically low interest rates, the Federal Reserve has started raising rates.
Nadex explains that rising dollar and interest rates tend to put downward pressure on the price of gold. The recent rally in the U.S. Dollar effectively increases the cost of carrying the precious metal and triggers a bearish response among investors. It’s important to note, however, that a strong dollar also means an influx of investment into the U.S., thereby strengthening the economy and increasing purchasing power.
