Gold a Good Target for Rumors
November 28, 2007
Everybody knows that the U.S. government is a big holder of gold bullion. It used to be said that the 260 million troy ounces that it has represents one-quarter of all the gold that was ever mined.
Since there has been a lot of gold mined since I first read that statement, the proportion is probably lower, but that is still one heck of a lot of gold.
Such a hoard attracts commentary from various and sundry sources. Every so often there is a rumor that the gold in Fort Knox is not really there. Back in the 1970s the rumor was so intense that there was actually a news conference to show off the stacks of 400-ounce gold bars. Numismatic News published the news and the photos.
Nowadays, the rumors take new twists. The government might still own the gold, it is said, but it has been leased out to the market to try to depress the price of the metal.
Well, if that is the case, they are doing a mighty poor job of depressing the price. That rumor is right up there with the war in Iraq was about the United States getting the oil. If we were acquiring oil, we sure did a poor job of it as any visit to a gas station will tell you.
But that is the nature of rumors.
In addition to rumors, there are conclusions based on snippets of information that don't really apply.
Some e-mails I have received recently in response to our online poll question basically say that if the government owns so much gold that it acquired for $35 an ounce or less, then gold coins from the Mint shouldn't be so expensive. After all, the government gets a profit, doesn't it?
Well, the Mint doesn't raid Fort Knox for its gold. It must buy it on the open market like everyone else. The one limitation is that legislation authorizing American Eagles specified that the gold the Mint buys must be mined within the country.
I don't expect the rumors and opinions about U.S. government gold to disappear. If they did, that wouldn't be any fun at all, now would it?
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